An evaluation of Arizona's competitiveness: the Arizona-Sonora project

An Evaluation An of Arizona's Competitiveness
The Arizona-Sonora Project
Marisa Paula Walker,
Office of Economic Development
Peter Likins, President Bruce A. Wright, Associate Vice President for Economic Development
D e c e m b e r 2000
Layout and Design: Biomedical Communications and Red Horse Graphics Editorial Services: Kirsteen E. Anderson
COPYRIGHT
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2001 Arizona Board of Regents
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An Evaluation of Arizona's Competitiveness
Prepared for the
Arizona-Mexico Commission
1700 W. Washington, Suite 180 Phoenix, AZ 85007 Phone: (602) 542-1345 Fax: (602) 542-1411 www.azmc.org
The Arizona-Sonora Project
Jane Dee Hull, Governor, State of Arizona Armando L�pez Nogales, Governor, State of Sonora Margie Emmermann, Governor's Policy Advisor for Mexico, State of Arizona Jos� C�rdenas, President, Arizona-Mexico Commission W. Russell Knocke, Executive Director, Arizona-Mexico Commission Lic. Alfonso Molina Ruibal, President, Comisi�n Sonora-Arizona Lic. Luis Carlos Soto, Executive Director, Comisi�n Sonora-Arizona Bruce A. Wright, Project Director, The University of Arizona Gail Lewis Howard, Project Director, Arizona State University
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An Evaluation of Arizona's Competitiveness
Contents
List of Tables ................................................................................................................. ..................................... v i List of Figures ................................................................................................................................................... v i i Acknowledgements ............................................................................................................... ............................. i x Introduction ........................................................................................................................................................ 1 Overview of the Evaluation ......................................................................................................................... 1 Research Methodology ........................................................................................................... ..................... 2 Key Findings from 1999 Evaluation of Arizona Competitiveness .................................................................... 3 Factors Contributing to Competitiveness .................................................................................................... 3 Summary of Findings .................................................................................................................................... 6 Where Arizona Could Capture a Larger Share of NAFTA Trade ................................................................. 9 Important Assets Arizona Should Market to Prospective Firms ................................................................ 1 1 Summary Observations ............................................................................................................................... 1 2 Growth in Trade to Mexico .............................................................................................................................. 1 3 Growth in Export Sales to Mexico ............................................................................................................. 1 3 Exports by Metro Area .......................................................................................................... ............................ 1 7 Export Trade Activity of Selected Southwestern Ports .............................................................................. 2 4 Skilled Human Resources and Labor Pool Development ................................................................................ 2 7 Labor Force and Industry Employment ..................................................................................................... 2 7 Maquiladora Employment .......................................................................................................................... 3 1 Educational Attainment .............................................................................................................................. 3 2 Educational Activities and Initiatives ........................................................................................................ 3 4 Maquiladoras and Regional Supplier Development ....................................................................................... 4 1 Profile and Growth of Maquiladoras .......................................................................................................... 4 1 Regional Activities and Initiatives ............................................................................................................ 4 3 Advanced Transportation Infrastructure ........................................................................................................... 4 9 Rail Transportation ..................................................................................................................................... 4 9 Air Transportation ...................................................................................................................................... 5 2 Highway Transportation ............................................................................................................................. 5 6 Border Ports of Entry .................................................................................................................................. 6 0 Initiatives and Strategies Underway to Enhance Trade with Mexico ............................................................. 6 3 Events, Trade Shows, and Conferences ........................................................................................... ........... 6 3 Export Assistance Programs and Initiatives ............................................................................................... 6 7 Trade and Protocol Missions ...................................................................................................................... 6 8 Strategic Planning Initiatives ................................................................................................. .................... 7 0 Concluding Observations ........................................................................................................ ......................... 7 7 Appendix ........................................................................................................................................................... 8 1 Export Trade Activity by City, 1999 .......................................................................................................... 8 1 Import Trade Activity by City, 1999 .......................................................................................................... 8 7 Notes 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Tables
Key Findings from 1999 Evaluation of Arizona Competitiveness 3.1. Competitive Advantages and Challenges to Economic Development, by City .................................. 4 3.2. Leading Site-Selection Factors Important to Survey Respondents ...................................................... 6 3.3. Leading Site-Selection Factors Most Often Judged Not Important ..................................................... 7 3.4. Leading Factors Respondents Consider Competitive in Existing Location ....................................... 7 3.5 Leading Community Location Factors Rated as Not Competitive ....................................................... 8 3.6. Evaluation of NAFTA-Related Competitiveness ............................................................................... .. 8 3.7. Economic Development Targets, by City ............................................................................................. 9 3.8. Key NAFTA-Oriented Economic Development Activities and Strategies, by City ........................... 1 0 Growth in Trade to Mexico 4.1. Top Five Merchandise Exports to Mexico, by Industry Sector, 1998 ................................................ 1 4 4.2. Change in Dollar Value of Selected Export Categories, 1993-1998 .................................................. 1 7 4.3. Change in Value of Exports by Metro Area, 199-1998 ....................................................................... 17 4.4. Change in Value of Exports by Metro Area, 1997-1998 .................................................................... 1 8 4.5. Top Metro-Area Exporters, 1997 and 1998 ................................................................................... .... 1 8 4.6. Percentage Change in Dollar Value of Exports, 1993-1998 and 1997-1998 ..................................... 1 9 4.7. Percentage Change in Merchandise Exports to NAFTA Countries and Mexico, 1993-1998 and 1997-1998 ................................................................................................................ 2 0 4.8. Merchandise Export Sales by Industry Sector, 1998 .......................................................................... 2 1 4.9. Percentage Change in Electric and Electronic Equipment Exports, 1993-1998 and 1997-1998 ..... 2 2 4.10. Percentage Change in Industrial Machinery and Computers Exports, 1993-1998 ......................... 2 2 4.11. Percentage Change in Scientific and Measuring Instruments Exports, 1993-1998 and 1997-199822 4.12. Percentage Change in Rubber and Plastic Exports, 1993-1998 and 1997-1998 ............................ 2 3 4.13. Percentage Change in Fabricated Metals Exports, 1993-1998 and 1997-1998 .............................. 2 3 4.14. Percentage Change in Primary Metal Exports, 1993-1998 and 1997-1998 .................................... 2 4 4.15. Export Trade by Leading Southwestern Ports, 1999 ........................................................................ 25 Skilled Human Resources and Labor Pool Development 5.1. City and County Civilian Labor Force Estimates, 1999 .................................................................... 2 7 5.2. Estimated Skilled Human Resources by Region, 1998 ...................................................................... 2 9 5.3. Maquiladora Employment in San Luis R�o Colorado, Sonora, April 1999 ....................................... 3 1 5.4. Estimated Regional Enrollment in Institutions of Higher Learning, Fall 1999 ................................ 3 3 5.5. Estimated Enrollment in Institutions of Higher Learning in the Mexicali, Baja California, Region, 1999 ..................................................................................................................................... 3 4 Maquiladoras and Regional Supplier Development 6.1. Percentage Change in Number of Maquiladoras, 1998 to 1999 ........................................................ 4 2 6.2. Trade Shows and Expos in the U.S. Border Region and Mexico ....................................................... 4 3 6.3. Maquiladora Employment, Output, and Productivity in Baja California, 1997 ............................... 4 6 Advanced Transportation Infrastructure 7.1. Dollar Value of Southbound Rail Freight, 1994-1999 ....................................................................... 4 9 7.2. Dollar Value of Northbound Rail Freight, 1994-1999 ....................................................................... 4 9 7.3. Dollar Value of Southbound Truck Freight, 1994-1999 .................................................................... 5 6 7.4. Dollar Value of Northbound Truck Freight, 1994-1999 ..................................................................... 5 7 7.5. Limitations of Southwestern U.S. Border Ports of Entry .................................................................... 6 0 vi
An Evaluation of Arizona's Competitiveness
Figures
Introduction 2.1. Map of U.S.-Mexico Border Region .......................................................................................... ........... 2 Growth in Trade to M�xico 4.1. Export Sales to Mexico, by State, 1993 and 1998 ............................................................................. 1 3 4.2. Percentage Change in Exports of Electric and Electronic Equipment, 1993-1998 .......................... 1 4 4.3. Electric and Electronic Equipment Sales to Mexico, 1993 and 1998 ............................................... 1 5 4.4. Percentage Change in Exports of Industrial Machinery and Computers, 1993-1998 ....................... 1 5 4.5. Industrial Machinery and Computer Sales to Mexico, 1993 and 1998 ............................................. 1 6 4.6. Percentage Change for Selected Export Categories, 1993-1998 ....................................................... 1 6 4.7. Percentage Share of Exports by Port, 1999 ................................................................................. ....... 2 5 Skilled Human Resources and Labor Pool Development 5.1. City Unemployment Rate Estimates, 1999 ......................................................................................... 2 8 5.2. County Unemployment Rate Estimates, 1999 ................................................................................... 2 8 5.3. Tijuana Maquiladora Employment, 1998 .......................................................................................... 3 2 5.4. College Educational Attainment Percentages by Region .................................................................. 3 3 Maquiladoras and Regional Supplier Development 6.1. Percentage of Maquiladoras by Industry Activity .............................................................................. 4 1 6.2. Percentage Share of Maquiladoras in Selected Mexican States, 2000 ............................................... 4 2 Advanced Transportation Infrastructure 7.1. Map of Proposed Naco Rail Port of Entry ........................................................................................... 5 1 7.2. Map of San Diego & Arizona Eastern Railway ................................................................................... 5 1 7.3. Total Passengers Enplaned and Deplaned, 1999 ................................................................................ 5 3 7.4. Total Air Freight and Mail Cargo, 1999 .............................................................................................. 5 3 7.5. Map of Canamex Corridor ................................................................................................................... 5 8 7.6. Map of Proposed California State Route 905 ..................................................................................... 5 9
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Acknowledgements
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n Evaluation of Arizona's Competitiveness was possible due to the critical support and guidance of the Arizona-Mexico Commission. Their leadership, commitment and vision to facilitate the development of a truly integrated binational region were instrumental in the production of this report. In addition, a special thank you is extended to the Arizona-Mexico Commission's Executive Board, as well as Bruce Wright, Vera Parlakovich-Kochi, Marshall Worden, David de Kok, Scott Davis and Jason Ott of the Office of Economic Development, who served as part of an internal review committee. Each of these individuals gave precious time in order to provide vital feedback on this report.
A large number of key contacts in each of the communities graciously welcomed the author and shared insightful information on their regions. Although it is not possible to list everyone, several people went beyond the call of duty to provide not just data, but encouragement and support. They include Augustine Garcia, Bill Bourland, Jose Felipe Garcia, Amy Echols Starkey, Stephanie Lemme, Art Macias, Joel Viers, Lee Ann Ayers, C. Paige Webster, Nan Valerio, Angelika Villagrana, Judy Harper, Joyce Grossman, Mario Hernandez, Henry E. Sauvignet and J. Michael Patrick. June Murphy and Alicia Foley provided additional assistance in the form of technical and administrative skills. Kirsteen Anderson and Cindy Betka, CMI, editor and layout designer respectively, provided unwavering attention under difficult timelines and conditions in order to see this project to completion.
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An Evaluation of Arizona's Competitiveness
Introduction
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A high-quality education system (K-12 and university) A skilled and talented workforce Advanced transportation infrastructure Economic development strategies to enhance and link these resources
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f a community is to be competitive in attracting wealth and investment, leaders must understand the implications of global economic trends toward increasing integration and interdependence. Communities around the world are seeking models of the conditions needed to create and support a dynamic business environment. Key ingredients in the competitive mix appear to include:
An Evaluation of Arizona's Competitiveness (2000 edition) addresses these key assets to guide Arizona economic development professionals in designing effective marketing approaches for their communities. As a product of the Arizona-Sonora Project binational development strategy, the Evaluation seeks to assist communities in capturing a larger share of North American Free Trade Agreement (NAFTA), western hemispheric, and global trade.
Overview of the Evaluation
The 2000 An Evaluation of Arizona's Competitiveness provides a comparative analysis of key communities in Arizona (Phoenix, Tucson, Yuma, Nogales, and Douglas) relative to California (San Diego and Calexico) and Texas (San Antonio, El Paso, and Laredo; Figure 2.1). The 1999 Evaluation of Arizona Competitiveness identified several factors contributing to competitiveness, which are reviewed in the first section of this report. To avoid unnecessary duplication of the previous report, the 2000 Evaluation focuses on providing statistics and economic development information in five areas:
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Growth in Trade to Mexico Skilled Human Resources and Labor Pool Development Maquiladoras and Regional Supplier Development Advanced Transportation Infrastructure Initiatives and Strategies Underway to Enhance Trade with Mexico
An Evaluation of Arizona's Competitiveness
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Concluding observations, based on the findings from both 1999 and 2000 reports, on ways to enhance Arizona's competitive position relative to selected communities in other southwestern states, can be found at the end of this study. Like the 1999 report, the 2000 Evaluation serves as a marketing tool for increasing Arizona's interaction in competitive markets.
Research Methodology
A host of information was consulted for this project. Sources include: ! Economic development offices at the state and local levels ! Internet sites and web pages ! Statistical reports and publications and articles for both professional and general readership. During the report preparation process, trips were made to each community to conduct interviews with key economic developers. In addition, business leaders, government officials, and academic scholars were consulted. Every attempt was made to provide comprehensive coverage, however assessing and identifying competitive advantages is a complex task with significant inherent measurement limitations, particularly in comparisons between the large metropolitan areas and the small communities along the border with Mexico.
FIGURE 2.1: MAP OF U.S. MEXICO BORDER
Source: Red Horse Graphics 2
An Evaluation of Arizona's Competitiveness
Key Findings from the 1999 Evaluation of Arizona Competitiveness
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Availability of skilled human resources Availability of key technologies Availability of advanced transportation and communication infrastructures Availability of key natural resources A sufficient customer base to encourage efficiency and innovation by firms Ability to maintain a lead in specific clusters Existence of key suppliers providing specialized inputs Firm structures that encourage skilled labor force development Existence of firms large enough to stimulate growth of a local supplier base Existence of goals and strategies for enhancing NAFTA trade
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Factors Contributing to Competitiveness
variety of factors influence the degree of competitive advantage one area holds over another. In terms of NAFTA-related enterprise, these factors include:
Table 3.1 summarizes the advantages and challenges faced by each community.
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TABLE 3.1 Competitive Advantages and Challenges to Economic Development, by City City Advantages Arizona Phoenix Strategic economic planning process with Sonora; cluster development in aerospace, semiconductors/high technology; supplier base for these industries; industrial and business services hub for the state; good air transportation services; potential hub functions for proposed CANAMEX corridor; establishment of market niches in bioindustry, software, environmental technologies, and information technologies. Distance from Mexican border relative to other profiled cities; minimal targeting of NAFTArelated firms; the head start and aggressive marketing by other communities relative to attracting NAFTA-oriented firms. Challenges
Tucson
Industry clusters in aerospace, optics, and software, and highly skilled workforce in these areas; high-quality health centers; metal-fabrication facilities; sophisticated educational structure.
Distance from the industrial base in Mexico; insufficient air transportation services and lack of rail service; high cost of real estate and utilities; high tax levels for high-technology and capital-intensive industries; less skilled workforce in plastics than Texas.
Yuma
Binational development efforts by the Rio Colorado Commission; availability of water; avionics industry cluster and infrastructure, with skilled workforce; agribusiness cluster.
Unfavorable external perceptions of the community; insufficient development of border port-ofentry infrastructure; lack of knowledge about the characteristics and needs of NAFTA firms.
Nogales
Highway and rail access to western Mexico; experimental unified port design project; expertise in importation and distribution of Mexican-grown fresh produce.
High cost and limited availability of real estate; shortage of well-educated, English-proficient workers; limited cultural amenities; traffic congestion and safety issues due to rail line through town.
Douglas
Uncongested port of entry; inexpensive land prices; availability of land for development; proximity to Fort Huachuca air base and related surveillance expertise; proximity to educated workforce in nearby Bisbee.
Shortage of qualified and skilled workers; low student education scores; insufficient air, highway, and rail linkages; limited operating hours at border port of entry; lack of hightechnology communication services; limited cultural amenities.
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An Evaluation of Arizona's Competitiveness
TABLE 3.1 Competitive Advantages and Challenges to Economic Development, by City City Advantages California San Diego Maquiladora concentrations in electronics and television sets; communications infrastructure; industry clusters in biotechnology, telecommunications, and defense. Stagnating living standards; high cost of living, especially real estate; shortage of engineers; highway links to Mexico congested and operating over capacity; lack of good rail connections; less than optimal air transport services; inadequate channel depth in harbor for container ships; most supplies for Asian-owned maquiladoras purchased elsewhere. Challenges
Calexico
Proximity to Baja California's capital, Mexicali; inexpensive land, labor, water, and electric power; stable labor base, which poses an advantage over Tijuana.
Local resistance to development of trade linkages with Mexico and Asia; expansion of Calexico-East BPOE creating conflict with El Centro; local resistance to joint development of the area; many college graduates leave the area.
Texas San Antonio Construction of "hush house" to support air-cargo Heavy reliance on tourism and lack of cluster traffic to Mexico and South America; the concentradevelopment in manufacturing; lack of incentive tion of international business services in a new trade for trade to stop in the city when it is required to center (Consul General of Mexico, Trade Commission stop two hours south in Laredo. of Mexico, Attorney General of Mexico, NADBANK, and commercial offices of several Mexican states); Casas San Antonio and Inland Port San Antonio initiatives; high level of collaboration among economic development organizations; meetings between mayor and Mexican presidents; promotion and marketing of Medical Destination Program; large number of well-educated bilingual workers.
El Paso
Emerging industry clusters in plastics and metals; growing maquiladora supplier base; concentration of maquiladoras, particularly in electronics.
Chronic congestion at toll-free BPOE; shortage of water; shortage of real estate for manufacturing; poor air quality.
Laredo
Transportation/distribution cluster; transportation Insufficiently diversified economy (too depeninfrastructure and geographical location; international dent on transportation/distribution); highway banking expertise in NAFTA trade. congestion and lengthy crossing times at ports of entry; inconvenient distance and poor highway to Columbia BPOE.
Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
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Summary of Findings Trade with MexicoState-Level Comparisons
The proportion of total export sales going to Mexico is highest for Texas (34 percent). For Arizona the proportion is 14 percent, and for California, 8 percent. When viewed in terms of growth in export sales, however, Arizona (80 percent) and California (94.3 percent) considerably outperform Texas (46.7 percent). Among the chief exports to Mexico from the three border states are electric and electronic equipment, industrial machinery and computers, chemical products, and rubber and plastic products. Primary metals, transportation equipment, and fabricated metals are also significant exports for Arizona. Texas stands out for growth in rubber and plastics, while California shows the highest growth in exports of paper products.
Survey Results
In survey responses from private firms in San Diego, El Paso, Laredo, Phoenix, Tucson, Yuma, Nogales, and Douglas the following site-selection factors were identified as important by the largest number of respondents (Table 3.2): TABLE 3.2 Leading Site-Selection Factors Important to Survey Respondents Arizona Responses (n = 30) Quality of life (n = 22) Real estate availability (n = 20) Real estate cost (n = 20) Workforce availability (n = 20) Highway infrastructure (n = 18) Workforce education/skill levels (n = 18) Right-to-work state (n = 18) Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999). California and Texas Responses (n = 24) Real estate availability (n = 18) Real estate cost (n = 18) Proximity to markets (n = 17) Quality of life (n = 17) Workforce availability (n = 16) Telecommunications service (n = 13)
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An Evaluation of Arizona's Competitiveness
The site selection factors most frequently cited as not important are listed in Table 3.3: TABLE 3.3 Leading Site-Selection Factors Most Often Judged Not Important Arizona Responses (n = 30) Rail transportation (n = 17) State job training programs (n = 16) Natural gas service (n = 15) Sea transportation (n = 14) Enterprise zones (n = 14) Natural gas cost (n = 13) California and Texas Responses (n = 24) Sea transportation (n = 14) Natural gas cost (n = 12) State job training programs (n = 12) Rail transportation (n = 11) Water cost (n = 11) Water service (n = 11) Natural gas service (n = 11) Enterprise zones (n = 11) Foreign trade zones (n = 11) Financing programs (n = 11) Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
The greatest number of respondents evaluated their existing locations as competitive in the categories listed in Table 3.4:
TABLE 3.4 Leading Factors Respondents Consider Competitive in Existing Location Arizona Responses (n = 30) Quality of life (n = 20) Real estate cost (n = 19) Highway infrastructure (n = 18) Real estate availability (n = 16) Right-to-work state (n = 16) Education skill level (n = 14) Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999). California and Texas Responses (n = 24) Workforce availability (n = 17) Proximity to markets (n = 17) Real estate availability (n = 13) Wages (n = 13) Quality of life (n = 12)
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Table 3.5 lists the categories in which respondents evaluated their existing locations as not being competitive. TABLE 3.5 Leading Community Location Factors Rated as Not Competitive Arizona Responses (n = 30) Sea transportation (n = 17) Property tax (n = 9) Electricity costs (n = 9) State job training (n = 9) Financing programs (n = 9) California and Texas Responses (n = 24) Sea transportation (n = 11) Property tax (n = 11) Electricity costs (n = 11) Water costs (n = 10) Water service (n = 9) State job training (n = 9) Time and cost of permitting process (n = 9) Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
Table 3.6 shows the order in which respondents ranked the seven communities studied in terms of NAFTA-related competitiveness: TABLE 3.6 Evaluation of NAFTA-Related Competitiveness Rank 1 2 3 4 5 6 7 Arizona Ratings Tucson, AZ Nogales, AZ El Paso, TX San Diego, CA Yuma, AZ, and Laredo, TX Phoenix, AZ Douglas, AZ Rank 1 2 3 4 5 6 California and Texas Ratings San Diego, CA El Paso, TX Nogales, AZ, and Laredo, TX Tucson, AZ Yuma, AZ, and Douglas, AZ Phoenix, AZ
Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
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An Evaluation of Arizona's Competitiveness
Where Arizona Could Capture a Larger Share of NAFTA Trade
Based on research done for this evaluation and for other projects aimed at enhancing Arizona's economy and increasing the state's economic interactions with Mexico, Arizona has the potential to increase its share of trade with Mexico and Latin America in a number of key areas, namely:
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High-technology activities, including semiconductor-based production operations Metal fabrication operations Medical devices, pharmaceuticals, and biotechnology Plastics Advanced border transportation technologies Air transport Warehousing and distribution Surveillance technologies
Targeted Growth Areas
As Table 3.7 indicates, each of the communities in this analysis has identified key areas of strength as well as specific targets for economic development. In each case, the choices are based on evaluation of that community's existing or potential ability to maintain a lead in that sector. TABLE 3.7 Economic Development Targets, by City City Key/Targeted Industries Arizona Phoenix Aerospace, high technology, bioindustry, business services, environmental technology, food/fiber/ natural products, information processing, manufacturing, software, transportation and distribution Aerospace, bioindustry, electric and electronic components, environmental technologies, instrumentation, metal fabrication, optics, software development, telecommunications Aerospace, agribusiness, electronics, high technology, light manufacturing, plastics, sheet metal stamping, telecommunications, tourism, senior living International trade, manufacturing/maquiladora, services, tourism Aerospace/high technology, computers, light industrial, manufacturing/maquiladora, professional services, telecommunication, tourism California San Diego Bioscience, communications, defense, electronics, manufacturing/maquiladoras, recreational goods, software, tourism Agribusiness, manufacturing suppliers
Tucson
Yuma
Nogales Douglas
Calexico
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Texas San Antonio International business services, manufacturing, health-care industry, communications, corporate and regional offices, tourism Advanced technical, back office, computer-related, headquarters, medical, motor vehicle production, retirement, resorts, tool and die manufacturing Manufacturing/maquiladora, services, transportation and distribution
El Paso
Laredo
Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
Goals and Strategies Oriented toward Trade with Mexico and Latin America
All the communities included in this analysis engage in economic development activities targeted specifically at Mexican and Latin American markets. Table 3.8 summarizes each community's activities. TABLE 3.8 Key NAFTA-Oriented Economic Development Activities and Strategies, by City City Activities and Strategies Arizona Phoenix Headquarters for statewide Binational Economic Development Commission; MatchMex97 binational industry partnering event; NAFTA (FEDEX) Conference; Environmental Technology Cluster grant focusing on developing business with Mexico; CANAMEX corridor; Strategic Economic Development Vision for the Arizona-Sonora Region ("The Arizona-Sonora Project"), which has a six-point plan that includes the development of binational clusters in the areas of health services, manufacturing, tourism, and agribusiness; a comprehensive workforce development strategy; increased efficiency in transportation and border crossing; and regulatory reforms to spur investment, and market promotionof the region. Maquiladora supplier development; Tucson-Mexico: Closer Than Ever--Mas Cerca que Nunca! project to facilitate business partnerships between Tucson and northwestern Mexico; Tucson-Sonora collaborative referral program; Mexico Seminar Series; CANAMEX corridor; Strategic Economic Development Vision for the Arizona-Sonora Region (see Phoenix for description). Binational Economic Development Commission; joint border strategic plan; maquiladora advertising campaign; directory of investors; international trade show; CANAMEX Corridor; Strategic Economic Development Vision for the Arizona-Sonora Region (see Phoenix for description); Arizona-Mexico Commission--Border Trade Alliance Border Strategic Partnership. Maquiladora supplier development; investment guide and interactive CD-ROM to market binational attributes; CANAMEX corridor; Strategic Economic Development Vision for the Arizona-Sonora Region (see Phoenix for description); Arizona-Mexico Commission--Border Trade Alliance Border Strategic Partnership. Maquiladora supplier development; investment guide to market binational attributes; binational marketing efforts involving economic development officials in Douglas and Agua Prieta; facilitation of dialogue between region's mayors; SEAGO's International Trade Center; Strategic Economic Development Vision for the Arizona-Sonora Region (see Phoenix for description); Arizona-Mexico Commission--Border Trade Alliance Border Strategic Partnership; border region business incubator; South Eastern Arizona Center for Agribusiness Development.
Tucson
Yuma
Nogales
Douglas
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An Evaluation of Arizona's Competitiveness
California San Diego Maquiladora supplier development; binational meetings of economic developers; binational communication network project; Golden Opportunities Program for small and mid-sized exporters; binational tourism marketing; NAFTA conferences; public/private intermodal transportation efforts; Cross-Border Connect Program. Binational collaboration on NAFTA conference; agribusiness trade show. Texas San Antonio Inland Port San Antonio concept, which includes the redevelopment of Kelly AFB and the designation of San Antonio as a NATAP pilot project; trade missions by the Free Trade Alliance and Casas San Antonio to Chile and Argentina promoting two-way trade and investment; Transporte Interna tional conference on trade and transportation issues; collaboration with customs administrators from Columbia Solidarity Bridge (Laredo) in an effort to promote the Inland Port project; monthly Mexico group meetings; promotion of 1999 Joint Business Conference. Maquiladora supplier development; binational industrial promotion and relocation guide; binational meeting of economic developers. Vision '97 International Trade Show; InfoCenter in Monterrey jointly operated with Corpus Christi.
Calexico
El Paso
Laredo
Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
Important Assets Arizona Should Market to Prospective Firms
Arizona has many assets and attributes that make it a particularly attractive location for firms seeking a platform for NAFTA-related enterprise. Among these qualities are:
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Arizona's long history of cordial relations with Sonora Activities of the Arizona-Mexico Commission/Comisi�n Arizona-Mexico in transboundary business development Strategic Economic Development Vision for the Arizona-Sonora Region ("Arizona-Sonora Project"), a unique long-range strategic planning process guided by several goals: w Developing the two states into a single economic region w Establishing Arizona-Sonora as a major hub on the NAFTA trade corridor w Eliminating trade barriers w Stimulating commercial development in several key industry sectors w Creating new markets for regional products and services
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Expansion of the Arizona-Sonora Project to include a six-point plan to (1) establish binational industry clusters (agribusiness, health services, manufacturing, and tourism); (2) implement a comprehensive workforce development and education strategy for the region; (3) implement efforts to increase efficiency in transportation and border crossings; (4) market the region for business development and attraction; (5) undertake regulatory reforms to encourage capital investment; and (6) integrate sustainable development and community-based development into the regional plan
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Expertise and experience in aerospace and avionics, and the presence of a supplier base for these sectors Expertise and considerable concentration of semiconductor and other high-technology firms, particularly in the greater Phoenix area Bioindustry expertise and activity (medical devices, biotechnology, pharmaceuticals) The formation of the Plastics and Advanced Materials Cluster offers important supplier linkages for the growing maquiladora industry in Mexico An extensive and diversified higher-education structure With the inclusion of Sonora, the existence of a large engineering workforce Explicit and active support at the state and local levels for formation and maintenance of industry clusters and formal industry cluster organizations in the sectors identified by the governor's task force as having strong potential for further growth and development Quality-of-life factors, including golf courses and conference facilities, abundant outdoor recreational opportunities, major-league sports teams (only San Diego is competitive with Phoenix in this regard), a wide array of superior programs in the higher-education realm, a lower cost of living than San Diego, and proximity to and accessibility of major metropolitan areas in California
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Su m m a r y Observations
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Arizona is in a good position to capture a larger share of NAFTA trade, if sharply focused marketing and recruitment strategies are implemented at the state and local levels. All the communities in this study are just beginning to generate supplier linkages to the maquiladoras; therefore an important window of opportunity exists for Arizona to move aggressively into this area of marketing. Arizona should recruit more plastics manufacturers to the state, given the wide uses of these materials in production operations, particularly in the medical device and electronics sectors. Arizona should place greater emphasis on generating NAFTA trade linked to the state's aerospace, avionics, and semiconductor strengths. Formalization of the CANAMEX corridor, a project to create a direct link between Canada and western Mexico, holds potential for placing Arizona at a crucial crossroads of NAFTA trade in the western reaches of Mexico, the United States, and Canada. It is also possible that, with appropriate business and transportation infrastructure development in the Yuma area, Arizona might capture trade from California. Given privatization activities in Mexico, Arizona must monitor developments closely and be positioned to move quickly into new areas of opportunity, such as the transportation sector. Strong consideration should be given to reducing the burden on small and medium-sized businesses wishing to qualify their products for duty-free NAFTA status. Arizona has many modest-sized firms with products that are highly competitive in Mexico; the marketing efforts of these firms need to be supported, at least in the short term; for example, through providing NAFTA training.
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An Evaluation of Arizona's Competitiveness
Growth in Trade to Mexico
Growth in Export Sales to Mexico
Figure 4.1: EXPORT SALES TO MEXICO BY STATE, 1993 and 1998 ($ in thousands)
25,000,000
21,626,583
D
uring the 1993-1998 period, Texas exceeded the export sales of both Arizona and California (see table 4.1). On the other hand, Arizona (83.3 percent) and California (111 percent) experienced greater increases in their trade relations with Mexico than did Texas (68.2).
20,000,000
120
111
Arizona California Texas
15,000,000
12,860,799 10,798,216
100
83
80 60
10,000,000
5,116,637 1,993,101 1,087,418
68
5,000,000
40 20 0
0 1993 Export Sales to Mexico 1998 Export Sales to Mexico
Percent Change 1993-1998
Source: U.S. Census Bureau, Exporter Location Series (June 1999)
Changes in Major Export Categories
Electric and electronic equipment and industrial machinery and computers continue to be the leading categories of merchandise exported to Mexico from Arizona, California, and Texas (Table 4.2). Notable differences begin to emerge in the third, fourth, and fifth rankings. For instance, rubber and plastic products is ranked third for Arizona and fifth for Texas, but does not appear in the top five exports for California. Transportation equipment is ranked third among California's exports to Mexico and is ranked fourth for Texas. Arizona is distinguished by high levels of exports in primary metals and paper products, California exports large amounts of fabricated metal products and apparel, and Texas is strong in chemical products.
An Evaluation of Arizona's Competitiveness
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TABLE 4.1: TOP FIVE MERCHANDISE EXPORTS SALES TO MEXICO, BY INDUSTRY SECTOR, 1998 Rank Arizona Manufactures 1 2 3 4 5 Electric & Electronic Equipment California Manufactures Electric & Electronic Equipment Texas Manufactures Electric & Electronic Equipment
Industrial Machinery & Computers Industrial Machinery & Computers Industrial Machinery & Computers Rubber & Plastic Products Primary Metals Paper Products Transportation Equipment Fabricated Metal Products Apparel Chemical Products Transportation Equipment Rubber & Plastic Products
Source: U.S. Census Bureau, Exporter Location Series (May 1999).
Electric and Electronic Equipment
Electric and electronic equipment sales to Mexico increased considerably for Arizona (130 percent) and California (202.7 percent) between 1993 and 1998 (Figure 4.1 and table 4.3). Although Texas experienced more modest growth (86.7 percent) during this period, it continues to lead in terms of dollar value of exports relative to the other border states. During 1997 and 1998 Arizona experienced a 4.2 percent decrease in export sales, compared to 9.8 percent and 8 percent growth for California and Texas respectively. FIGURE 4.2: PERCENTAGE CHANGE IN EXPORTS OF ELECTRIC AND ELECTRONIC EQUIPMENT, 1993-1998
250 202
200
150 130 100 86
50
0 Arizona California Texas
Sour ce: U.S. Census Bureau, Exporter Location S eries (May 1999)
14
An Evaluation of Arizona's Competitiveness
FIRGURE 4.3: ELECTRIC AND ELECTRONIC EQUIPMENT SALES TO MEXICO 1993 AND 1998
5,000,000
4,869,618
4,500,000 4,000,000 3,500,000 3,000,000
2,607,972 3,710,506
2,500,000 2,000,000 1,500,000 1,000,000
603,643 1,224,618
500,000 0
262,456
Texas California Arizona
Texas California Arizona
1993
1998
Source: U.S. Census Bureau, Explorter Location Series (May 1999)
Industrial Machinery and Computers
In the industrial machinery and computers sector, California experienced the greatest increase in export sales to Mexico from 1993 to 1998 (102.3 percent), followed by Texas (60.1 percent) and Arizona (36.2 percent). (Figure 4.2 and table 4.4.) Indeed, the data for 1997 and 1998 indicate that Arizona saw a -10.5 percent decrease in this sector, relative to growth in Texas (29 percent) and California (6.3 percent). FIGURE 4.4: PERCENTAGE CHANGE IN EXPORTS OF INDUSTRIAL MACHINERY AND COMPUTERS, 1993-1998
120
102
100
80
60
60
36
40
20
0 Arizona California Texas
Source: U.S. Census Bureau, Exporter Location Series (May 1999)
An Evaluation of Arizona's Competitiveness
15
FIGURE 4.5: INDUSTRIAL MACHINERY AND COMPUTER SALES TO MEXICO, 1993 AND 1998
2,500,000
2,409,383
2,000,000
1,542,216
1,500,000
1,505,230
1,000,000
762,250
500,000
312,074 229,153
0
Texas California Arizona Texas California Arizona
1993
1998
Source: U.S. Census Bureau, Exporter Location Series (May 1999)
Change in Selected Export Categories
During the 1993 to 1998 period, Arizona continued to experience considerable growth in export sales of primary metals (296.8 percent) and fabricated metals (115.4 percent). California saw a notable increase of 115.6 percent in trade of chemical products, compared to 72.1 percent and 64.1 percent growth in Texas and Arizona, respectively. In addition, California stood out for growth in paper product sales (112.9 percent), followed by Arizona (97.3 percent) and Texas (33.7 percent). California's increase in transportation exports (116.9 percent) during this period is surprising given the decrease experienced by Texas (-2.4 percent) and the modest growth registered by Arizona (22.9 percent). Arizona's modest growth in transportation exports is accounted for in part by a drastic -45.4 percent decrease in sales from 1997 to 1998, reversing a growth trend in the previous years. Texas led the other states in rubber and plastic product exports, with an increase of 226 percent during the 1993 to 1998 period (Figure 4.3 and table 4.5). FIGURE 4.6: PERCENTAGE CHANGE FOR SELECTED EXPORT CATEGORIES, 1993-1998
300 250
226 296
Rubber and Plastic Primary Metal Chemical Products Paper Products Fabricated Metal Transportation Equipment
96 72 58 22 33
200
162
150
115 115 112 79 64 116 101
144 97
100 50 0
-2
-50 Arizona California Texas
Source: U.S. Census Bureau, Exporter Location Series, (May 1999)
16
An Evaluation of Arizona's Competitiveness
TABLE 4.2: CHANGE IN DOLLAR VALUE OF SELECTED EXPORT CATEGORIES, 1993-1998 Arizona 1993 1998 Rubber & Plastic Products Primary Metals Chemical Products Paper Products Fabricated Metal Products Transportation Equipment $69,967 $36,852 $25,467 $68,451 $58,483 $33,122 $183,786 $146,237 $41,791 $135,060 $125,984 $40,699 California 1993 1998 $243,672 $227,940 $228,946 $168.060 $269,417 $252,528 $437,636 $362,158 Texas 1993 1998 $444,786 $1,449,867 $559,290 $1,366,603
$493,683 $1,092,040 $1,879,096 $357,829 $541,723 $570,684 $422,231 $762,831 $827,676
$547,823 $1,562,255 $1,524,439
Source: U.S. Census Bureau, Exporter Location Series (May 1999).
Exports by Metro Area
All the major metropolitan areas included in this report (Phoenix and Tucson, Arizona; San Diego, California; and San Antonio, El Paso, and Laredo, Texas) experienced various degrees of growth in total international exports, as table 4.6 indicates. In terms of export-related dollar gains for all U.S. metro areas (listed by growth in merchandise value), San Diego led the other communities for the 1993-1998 period. San Diego's top ranking underscores a downward shift for the Phoenix-Mesa area, which had dominated among the communities until 1997. Whereas Phoenix experienced a sudden reversal after 1997, Laredo showed a steady, significant decrease. TABLE 4.3: CHANGE IN EXPORT VALUE BY METRO AREA, 1993-1998 Rank 8 11 12 42 52 250 Metro Area San Diego, California Phoenix-Mesa, Arizona El Paso, Texas San Antonio, Texas Tucson, Arizona Laredo, Texas Change in Export Value $4,233,876 3,603,814 3,577,535 1,076,905 766,297 -428,253
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
For the 1997 to 1998 period alone, San Diego's performance in export-related dollar gains again exceeds that of El Paso, San Antonio, Tucson, Laredo, and Phoenix-Mesa (Table 4.7). Indeed the dramatic $3 million decrease for Phoenix-Mesa during this one-year period explains its fall to a ranking behind San Diego for total dollar gains during 1993-1998.
An Evaluation of Arizona's Competitiveness
17
TABLE 4.4: CHANGE IN EXPORT VALUE BY METRO AREA, 1997-1998 Rank 5 6 15 21 234 253 Metro Area San Diego, California El Paso, Texas San Antonio, Texas Tucson, Arizona Laredo, Texas Phoenix-Mesa, Arizona Growth in Export Value $781,622 710,633 298,011 192,894 -325,540 -3,005,635
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
The rankings for U.S. metro-area exporters in 1998 (listed by dollar value) show San Diego leading Phoenix-Mesa, El Paso, and Laredo (see table 4.8). San Antonio and Tucson rank far behind these communities. Comparing the dollar values for 1997 and 1998, Phoenix stands out for its dramatic loss of position. In 1997, Phoenix was rated the 10th largest metro-area exporter, ahead of San Diego; by 1998, it had dropped to 17th place.
TABLE 4.5: TOP METRO-AREA EXPORTERS, 1997 AND 1998 Rank 12 17 21 37 70 85 Metro Area San Diego, California Phoenix-Mesa, Arizona El Paso, Texas Laredo, Texas San Antonio, Texas Tucson, Arizona Total Exports, 1997 $7,810,003 11,108,393 5,833,929 3,959,112 1,342,822 1,060,526 Total Exports, 1998 $8,591,625 8,102,758 6,544,562 3,633,572 1,640,833 1,253,420
Source: U.S. Census Bureau, Exporter Location Series (November 1999). In terms of percentage change in dollar value of exports between 1993 and 1998, San Antonio, Tucson, El Paso, and San Diego all experienced greater growth than the national average (Table 4.9). Phoenix and Laredo failed to meet the average nationwide for both 1993 to 1998 and 1997 to 1998. Phoenix's decline of -8.2 percent during 1997-1998 is a substantial reversal from the 40.4 percent increase it experienced during 1996-1997.
18
An Evaluation of Arizona's Competitiveness
TABLE 4.6: PERCENTAGE CHANGE IN DOLLAR VALUE OF EXPORTS 1993-1998 AND 1997-1998 Metro Area San Antonio, Texas Tucson, Arizona El Paso, Texas San Diego, California Phoenix-Mesa, Arizona Laredo, Texas U.S. national average 1993-1998 191.0 157.3 120.6 97.2 80.1 -10.5 89.8 1997-1998 22.2 18.2 12.2 10.0 -8.2 -27.1 10.7
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
To summarize the trends in trade:
l
In terms of greatest dollar gain for 1993-1998 and 1997-1998, the San Diego metro region leads the other communities; in contrast, the Phoenix-Mesa metro region experienced a dramatic reversal during both time periods. Tucson's ranking of 85th in total exports for 1998 continued to place it far behind San Diego (12th), Phoenix-Mesa (17th), El Paso (21st), Laredo (37th), and San Antonio (70th). On the other hand, among the studied cities, Tucson's rate of growth (157.3 percent for 1993-1998 and 18.2 percent for 1997-1998) was the second fastest behind only San Antonio.
l
Exports to NAFTA Countries, 1993-1998 and 1997-1998
As table 4.10 shows, during the 1993 to 1998 period, Tucson's 124.6 percent growth in export sales to NAFTA markets trailed behind only San Antonio (273.8 percent). In fact all the communities except Phoenix-Mesa and Laredo experienced triple-digit growth between 1993 and 1998, and Laredo was the only community to register a decline (-11.3 percent) for this period. Phoenix-Mesa and Laredo continued to stand out relative to the other communities for percentage decreases (-6.8 and -9.2 percent respectively) between 1997 and 1998. San Antonio (27.9 percent) led the communities during 1997 and 1998, followed by San Diego (13.8 percent), El Paso (11.3 percent), and Tucson (4.4 percent). In terms of trade with Mexico specifically, San Antonio experienced tremendous growth, with a 329.5 percent increase during 1993-1998, followed by El Paso (114.1 percent), Tucson (109.7 percent), and San Diego (105.4 percent). In contrast, Phoenix experienced more modest growth (74.2 percent) and Laredo brought up the rear with a -14.9 percent decrease (Table 4.10). The same general ranking holds true for 1997-1998. San Antonio led the group with a 29.6 percent increase. Notable trends during this period are that San Diego (11.4 percent) experienced greater growth than Tucson (2.2 percent), and Phoenix-Mesa (-13.4 percent) shared the distinction of negative change with Laredo (-6.5 percent).
An Evaluation of Arizona's Competitiveness
19
TABLE 4.7: PERCENTAGE CHANGE IN MERCHANDISE EXPORTS TO NAFTA COUNTRIES AND MEXICO, 1993-1998 AND 1997-1998). Metro Area San Antonio, Texas Tucson, Arizona El Paso, Texas San Diego, California Phoenix-Mesa, Arizona Laredo, Texas NAFTA Countries 1993-1998 1997-1998 273.8 124.6 121.0 114.3 93.2 -11.3 27.9 4.4 11.3 13.8 -6.8 -9.2 Mexico 1993-1998 1997-1998 329.5 109.7 114.1 105.4 74.2 -14.9 29.6 2.2 13.3 11.4 -13.8 -6.5
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Major Export Categories, by City
The rankings in Table 4.11 indicate the relative importance of various export categories for the Phoenix-Mesa, San Diego, El Paso, and Laredo areas. Data are not available for San Antonio and Tucson. The data reveal the following major points about world exports: Electric and electronic equipment is the most significant export for Phoenix-Mesa, San Diego, and El Paso, and the second most significant export for Laredo. Transportation equipment continues to lead Laredo's exports and is the number-three export for the Phoenix-Mesa metro region. Between 1997 and 1998, this sector moved up to fourth in importance for San Diego; it is not among the top ten exports for El Paso. Industrial machinery and computers ranks second for Phoenix-Mesa and San Diego exports, and third for Laredo. The sixth place ranking for El Paso represents an improvement from seventh place in 1997. Rubber and plastic products rank second for El Paso, seventh for both San Diego and Laredo, and ninth for PhoenixMesa. Apparel, the third most important export for El Paso, does not appear among the top ten export sectors for any of the other three metro areas. Scientific and measuring instruments ranks third among San Diego exports, fourth for Phoenix-Mesa, and tenth for both El Paso and Laredo. Primary metals ranks fourth among exports for El Paso, sixth for Laredo, eighth for Phoenix-Mesa, and tenth for San Diego. Chemical products ranks fourth for Laredo, sixth and seventh for San Diego and Phoenix-Mesa respectively, and does not appear among the top ten exports for El Paso. Paper products ranks eighth for both El Paso and Laredo and ninth for San Diego; it does not appear in the top ten exports for Phoenix-Mesa. Fabricated metal products, which was not among the top ten exports for Phoenix-Mesa in 1997, now ranks sixth for that metro region, followed by El Paso (7th) and San Diego (8th). Interestingly, in 1996 this was the third most important export category for Laredo, but it has not shown up in the top ten exports since then. 20
An Evaluation of Arizona's Competitiveness
TABLE 4.8: MERCHANDISE EXPORT SALES BY INDUSTRY SECTOR, 1998 Rank 1 Phoenix-Mesa Electric & Electronic Equipment Industrial Machinery & Computers Transportation Equipment Scientific & Measuring Instruments Non-Manufactured Products Fabricated Metal Products Chemical Products San Diego Electric & Electronic Equipment Industrial Machinery & Computers Scientific & Measuring Instruments Transportation Equipment Miscellaneous Manufactures Chemical Products El Paso Electric & Electronic Equipment Rubber & Plastic Products Apparel Laredo Transportation Equipment
2
Electric & Electronic Equipment Industrial Machinery & Computers Chemical Products
3
4
Primary Metals
5
Textile Mill Products
Food Products
6
Industrial Machinery & Computers Fabricated Metal Products Paper Products
Primary Metals
7
Rubber & Plastic Products Fabricated Metal Products Paper Products
Rubber & Plastic Products Paper Products
8
Primary Metals
9
Rubber & Plastic Products Refined Petroleum
Furniture & Fixtures
Non-Manufactured Products
10
Primary Metals Products
Scientific & Measuring Scientific & Measuring Instruments Instruments
Source: U.S. Census Bureau, Exporter Location Series (November 1999). Selected sectors were identified for more detailed analysis either because they appear among the leading exports of more than one state or because they have been targeted for cluster or industry development. Information on these sectors follows.
Electric and Electronic Equipment
Change in exports of electric and electronic equipment is displayed in table 4.12. From 1993 to 1998, San Diego's activity in the electric and electronic equipment sector grew at twice the rate of El Paso (193.9 percent to 94.6 percent), at triple the rate of Phoenix-Mesa (53.6 percent), and at seven times the rate of Laredo (25.4 percent). San Diego continued to lead in 1997-1998, with more modest growth for El Paso and dramatic decreases for both Phoenix-Mesa (51.3 percent) and Laredo (-37.5 percent).
An Evaluation of Arizona's Competitiveness
21
TABLE 4.9: PERCENTAGE CHANGE IN ELECTRIC AND ELECTRONIC EQUIPMENT EXPORTS, 1993-1998 AND 1997-1998 Metro Area San Diego, California El Paso, Texas Phoenix-Mesa, Arizona Laredo, Texas 1993-1998 193.9 94.6 53.6 25.4 1997-1998 7.2 0.3 -51.3 -37.5
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Industrial Machinery and Computers
The Phoenix-Mesa region experienced a significant increase (199.4 percent) in industrial machinery and computer exports during the 1993-1998 period, which was tempered by a considerable, decrease (-76.0 percent) during 19971998. Both El Paso and San Diego showed relatively strong growth during this time. Laredo stands out for a -12.9 percent decrease between 1993 and 1998, which masked a near reversal (a 10.2 percent increase) during 1997-1998 (Table 4.13). TABLE 4.10: PERCENTAGE CHANGE IN INDUSTRIAL MACHINERY AND COMPUTERS EXPORTS, 1993-1998 AND 1997-1998 Metro Area Phoenix-Mesa, Arizona El Paso, Texas San Diego, California Laredo, Texas 1993-1998 199.4 93.7 76.2 -12.9 1997-1998 -76.0 34.4 15.8 10.2
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Scientific and Measuring Instruments
El Paso's total exports of scientific and measuring instruments for 1993-1998 grew by 213.1 percent, whereas PhoenixMesa registered a much more modest 36.5 percent growth and San Diego just 28.9 percent growth (Table 4.14). Laredo, at -22.7 percent, saw a significant decline in this sector over the same period. El Paso, San Diego, and Laredo experienced very modest increases in 1997-1998, whereas the Phoenix-Mesa area registered a decline (-9.9 percent). TABLE 4.11: PERCENTAGE CHANGE IN SCIENTIFIC AND MEASURING INSTRUMENT EXPORTS, 1993-1998 AND 1997-1998 Metro Area Phoenix-Mesa, Arizona El Paso, Texas San Diego, California Laredo, Texas 1993-1998 213.1 36.5 28.9 -22.7 1997-1998 9.9 -9.9 5.6 2.72
Source: U.S. Census Bureau, Exporter Location Series (November 1999). 22
An Evaluation of Arizona's Competitiveness
Rubber and Plastic Products
In the rubber and plastic products sector, El Paso experienced more than four times the growth of Phoenix-Mesa, nearly eight times the growth of San Diego, and 19 times that of Laredo (Table 4.15). During 1997-1998, both El Paso and Phoenix continued to experience positive growth, in contrast to declines registered in San Diego (-21.3 percent) and Laredo (-2.4 percent). TABLE 4.12: PERCENTAGE CHANGE IN RUBBER AND PLASTIC EXPORTS, 19931998 AND 1997-1998 Metro Area Phoenix-Mesa, Arizona El Paso, Texas San Diego, California Laredo, Texas 1993-1998 543.6 116.3 68.9 28.2 1997-1998 20.2 18.9 -21.3 -2.4
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Fabricated Metal Products
Triple-digit growth occurred in exports of fabricated metals from the El Paso (362.6 percent) and Phoenix-Mesa (252.1 percent) areas, and San Diego (41.4 percent) experienced a modest increase as well. Laredo was the only community to see a decrease during 1993-1998, but this trend reversed in 1997-1998. El Paso experienced the greatest increase (31.2 percent) during 1997-1998, followed by Phoenix-Mesa (25.5 percent). San Diego and Laredo were nearly identical in their growth for this period with 18.3 percent and 18.2 percent respectively (Table 4.16). TABLE 4.13: PERCENTAGE CHANGE IN FABRICATED METAL EXPORTS, 19931998 AND 1997-1998 Metro Area Phoenix-Mesa, Arizona El Paso, Texas San Diego, California Laredo, Texas 1993-1998 362.6 252.1 41.4 -37.3 1997-1998 31.2 25.5 18.3 18.2
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Primary Metals
El Paso led the group in primary metal exports for 1993-1998 at 206.1 percent, followed by San Diego (59.1 percent) and Laredo (35.9 percent). The decline experienced by the Phoenix-Mesa metro area persisted in 1997-1998. Despite dramatic growth over the long term, San Diego was the only other community whose exports declined in 1997-1998, with a -4.6 percent drop.
An Evaluation of Arizona's Competitiveness
23
TABLE 4.14: PERCENTAGE CHANGE IN PRIMARY METAL EXPORTS, 1993-1998 AND 1997-1998 Metro Area Phoenix-Mesa, Arizona El Paso, Texas San Diego, California Laredo, Texas 1993-1998 206.1 59.1 35.9 -55.6 1997-1998 11.3 -4.6 14.8 -37.9
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Export Trade Activity of Selected Southwestern Ports
Because the U.S. Census Bureau data compiled in the Exporter Location Series provides information only on the largest metropolitan areas, U.S. Customs data were used to explore market potentials for the smaller communities of Douglas, Nogales, Yuma, and Calexico. This analysis has been expanded to include San Ysidro and Tecate (important ports of entry for San Diego) and Naco, which is located west of Douglas, Arizona. Data on total export trade for 1999 by select ports along the U.S.-Mexico border provides information on each port's percentage share and relative ranking (see figure 4.4 and table 4.18). Data for 1999 compiled by the Border Trade Institute at Texas A&M International University indicate similar patterns of export behavior with Mexico. (The top ten exports and imports of relevant border cities, by SITC code, can be found in the appendix.) In terms of trade with Mexico specifically, the following patterns hold true:
l
Motor vehicles for the transport of persons (SITC 78120) was the leading export for the Nogales and Laredo ports, the third leading export for San Diego, and the eighth for Tucson. Television receivers, color, including video monitors and projectors (SITC 76110) was the most important export for San Luis and El Paso and fourth for San Ysidro. Refined copper wire (SITC 68241) was the second leading export for both the Douglas and Naco ports. Gold including gold plated with platinum (SITC 97101) was third for Tucson and fifth for Tecate. Trousers, bib and brace overalls, breeches and shorts, for women or girls (SITC 84260) was ranked third among export categories for San Luis, sixth for the ports of Laredo and Otay Mesa, eighth for El Paso, and ninth for Douglas. The fourth-ranked commodities for both Tucson and Phoenix were parts of airplanes or helicopters (SITC 79295). This category did not show up in the ten leading exports of any of the other communities. Transmission apparatus for radiotelephony, radiotelegraphy, radio broadcasting, or television (SITC 76431) were the fourth most important exports for Nogales and El Paso, and was the seventh for Phoenix. Naco's fourth leading export, electric plugs and sockets not exceeding 1,000 volts (SITC 77258), was the seventh most important for Nogales. Special transactions and commodities not classified (SITC 93100) was ranked second for Tucson and Phoenix, and was relatively less important for other communities: El Paso (third), Douglas (fourth), San Luis (fifth), Naco (sixth), and Nogales and Laredo (both eighth). The only Californian port for which this export category shows up was San Ysidro (sixth).
l
l l l
l
l
l
l
24
An Evaluation of Arizona's Competitiveness
FIGURE 4.7: PERCENTAGE SHARE BY PORTS
Other ports
Naco Tucson Douglas San Luis Tecate San Diego Phoenix San Ysidro Calexico East
Laredo
Nogales
Otay Mesa El Paso
Source: Border Trade Institute, Texas A&M International University (April 2000)
TABLE 4.15: EXPORT TRADE BY LEADING SOUTHWEST PORTS, 1999 Community Laredo, Texas El Paso, Texas Otay Mesa, California Nogales, Arizona Calexico East, California San Ysidro, California Phoenix, Arizona San Diego, California Tecate, California San Luis, Arizona Douglas, Arizona Tucson, Arizona Naco, Arizona Total for Southwestern Ports, 1999 Ranking by Percentage Share 1 2 4 6 8 10 11 12 13 14 15 16 21 -- Dollar Value of Trade $29,864,822,746 12,994,315,229 5,087,992,213 4,159,634,964 3,436,529,239 1,200,392,282 568,125,667 558,023,639 469,157,430 368,657,760 297,029,679 148,556,876 77,824,987 $74,913,401,554
Source: Border Trade Institute, Texas A&M International University (April 2000).
An Evaluation of Arizona's Competitiveness
25
A review of 1998 export data reflects the presence of only four of the leading commodities for 1999.
l
Parts of automatic processing machines and units thereof, magnetic or optical readers and machines for transcribing and processing data (SITC 75997) was for 1999 the third-ranked category for Douglas, followed by El Paso (fifth), and Laredo and Otay Mesa (both sixth). In 1998, this commodity was the third leading export for Phoenix, ninth for Laredo, and did not even rank among the top ten for El Paso and Laredo. Articles of iron or steel (SITC 69969) was the third-ranked category for Douglas and the ninth for El Paso in 1998. A year later it completely dropped off the top ten export lists for any Arizona or Texas port. It does appear as the second leading export for San Ysidro, the third for Calexico, and the eighth for Otay Mesa, all ports in California. Between 1998 and 1999, nondigital monolithic integrated units (SITC 77643) went from being the fourth most important export for Phoenix to the tenth. This category was the most important export for Calexico in 1998; however, current data indicate that it is no longer in the top ten for Calexico and instead has emerged in tenth place for Otay Mesa. Ranked third and sixth respectively for the ports of Yuma and Nogales in 1998, exports of cartons, boxes, and cases of corrugated paper or paperboard (SITC 64211) appear to have shifted to ports in California by 1999. Most recent figures rank this commodity as the fifth most important export for Otay Mesa and the tenth for Tecate.
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l
l
26
An Evaluation of Arizona's Competitiveness
Skilled Human Resources and Labor Pool Development
T
City
he availability of skilled human resources was identified in the 1999 Evaluation of Arizona Competi tiveness as an important factor contributing to a region's ability to compete economically. For the plastics industry in particular, it was found that advantageous incentive packages in many cases were not enough to lure companies away from qualified workers. A community's workforce must be able to produce valuable products and services, in order to attract and retain employers as well as increase wages.1 A higher skill base demands higher wages because companies require "intelligence capital" to succeed in the current technology-driven economy. The presence of skilled labor is an investment incentive because these talented employees allow firms to be innovative and identify processes for expediting the movement of goods and services.2 In the Yuma region, for instance, the Proving Ground cites a high-quality workforce and favorable climate as critical components in their competitive advantage strategy. At the facility, employees skilled in the utilization of sophisticated technology are conducting an average of 100 tests at any one time.3
Labor Force and Industry Employment
Table 5.1 and Figures 5.1 and 5.2 provide information on the general characteristics of each community's labor force. The data measure civilian labor employment and unemployment rates for the cities and counties in the study area. TABLE 5.1: CITY AND COUNTY CIVILIAN LABOR FORCE ESTIMATES, 1999; Civilian Labor Force 726,609 622,790 526,726 258,293 239,084 68,006 34,686 8,815 6,230 4,601 County Maricopa San Diego Bexar El Paso Pima Webb Yuma Santa Cruz Imperial Cochise Civilian Labor Force 1,514,859 1,358,200 669,947 287,600 384,579 72,729 66,773 13,396 42,800 39,994
Phoenix, Arizona San Diego, California San Antonio, Texas El Paso, Texas Tucson, Arizona Laredo, Texas Yuma, Arizona Nogales, Arizona Calexico, California Douglas, Arizona
Sources: Arizona Department of Economic Security, Special Unemployment Report for January through December 1999, Revised March 2, 2000, Research Administration Benchmark 1999; California Employment Development Department, Labor Market Information Division, Labor Force Data for Sub-County Areas, Not Seasonally Adjusted 1999 Benchmark--March 28, 2000, available from Internet: www.calmis.ca.gov/file/lfhist/99aasub.txt; Texas Workforce Commission, City and County Civilian Labor Force Estimates Actual Series, 1990-Current Modified April 20, 2000; available from Internet: www.twc.state.tx.us/lmi/lfs/type/unemploymentcityb260.htm.
An Evaluation of Arizona's Competitiveness
27
FIGURE 5.1: CITY UNEMPLOYMENT RATE ESTIMATES
35
31
30 25
21 22
20 15
11
10 5 0
3 3 3 3
8
9
San Tucson Phoenix San Laredo El Paso Douglas Yuma Nogales Calexico Diego Antonio
FIGURE 5.2: COUNTY UNEMPLOYMENT RATE ESTIMATES
30
30 25 20
17
23
15 10
6 8 9
5 0
3
3
3
3
Maricopa Pima
San Diego
Bexar Cochise Webb
El Paso Santa Imperial Yuma Cruz
Sources: Arizona Department of Economic Security, Special Unemployment Report for January through December 1999, Revised March 2, 2000, Research Administration Benchmark 1999; California Employment Development Department, Labor Market Information Division, Labor Force Data for Sub-County Areas, Not Seasonally Adjusted 1999 Benchmark--March 28, 2000, available from Internet: www.calmis.ca.gov/file/lfhist/99aasub.txt; Texas Workforce Commission, City and County Civilian Labor Force Estimates Actual Series, 1990-Current Modified April 20, 2000; available from Internet: www.twc.state.tx.us/lmi/lfs/type/unemploymentcityb260.htm.
28
An Evaluation of Arizona's Competitiveness
Skilled Labor Employment
Data from the Bureau of Labor Statistics allows comparison of occupational employment strengths and weaknesses among the various communities. The 1998 data, summarized in table 5.2, indicate the following notable differences:
l
Phoenix, with the largest employment total, stands out from its closest competitor, San Diego, in many of the occupational classifications. San Diego is distinguished by larger numbers of computer engineers, machinists, and both electronic assemblers and electronic precision assemblers. Despite having less than half the occupational base of San Antonio, Tucson employs larger numbers of chemical engineers and materials engineers. Yuma exceeds both Laredo and Douglas in the number of production/operations first line supervisors. Douglas is distinguished for having twice as many engineering, mathematical, and natural sciences managers as either Laredo or Yuma, because of the proximity of Fort Huachuca Army Base. The county has more than twice as many electrical/electronic technicians and computer support specialists, and eight times as many systems analysts as Laredo. Finally, it exceeds both Laredo and Yuma in the number of computer programmers; in fact, Douglas has nine times the number of computer programmers as are in Yuma. San Antonio exceeds both Tucson and Phoenix in the number of aircraft mechanics. El Paso and San Antonio exceed Tucson in the number of tool/die makers. Relative to Tucson and San Antonio, El Paso is distinguished for its workforce of plastic molding operators, quite possibly a reflection of the city's aggressive strategy over the past few years of focusing on the development and recruitment of plastics and injection molding operations. El Paso also has more than three times the number of electronic precision assemblers as San Antonio does.
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TABLE 5.2: ESTIMATED SKILLED HUMAN RESOURCES BY REGION, 1998
Occupation Phoenix, Tucson, Yuma, Douglas, San San El Paso, Laredo, Arizona Arizona Arizona Arizona Diego, Antonio, Texas Texas California Texas
Accountants/auditors
11,290
1,640
140
80
7,930
4,550
990
310
Aircraft mechanics
1,430
930
n/a
n/a
n/a
2,170
n/a
n/a
Chemical engineers
300
80
n/a
n/a
180
50
n/a
n/a
Computer engineers
3,620
790
n/a
340
4,030
2,230
50
n/a
Computer programmers
8,580
1,310
20a
180
5,890
1,840
320
120
Computer programmer aides
1,820
270
n/a
n/a
810
310
30
n/a
Computer support specialists
6,450
1,300
30
60
5,070
1,330
310
100
Database administrators
1,360
220
n/a
n/a
980
390
160
n/a
Continue Table 5:2 on page 30
An Evaluation of Arizona's Competitiveness
29
Occupation
Phoenix, Tucson, Yuma, Douglas, San San El Paso, Laredo, Arizona Arizona Arizona Arizona Diego, Antonio, Texas Texas California Texas
Electrical/electronic assemblers
2,210
360
n/a
n/a
3,620
790
560
n/a
Electrical/electronic engineers 6,870
730
n/a
n/a
5,400
1,030
390
n/a
Electrical/electronic precision 1,940 assemblers Electrical/electronic technicians 7,790
n/a
n/a
n/a
3,270
100
320
n/a
820
n/a
130
6,590
1,120
480
60
Engineering, mathematical, 6,000 and natural sciences managers General managers/top executives Industrial machinery mechanics Machinists 30,210
880
40
80
4,100
1,690
350
40
6,120
680
570
28,350
18,960
6,330
2,200
2,070
240
30
20
1,370
890
580
80
3,700
920
n/a
n/a
4,440
940
590
n/a
Marketing/sales supervisors
20,910
4,140
500
410
14,950
8,680
2,780
810
Materials engineers
280
70
n/a
n/a
180
60b
n/a
n/a
Mechanical engineers
3,660
290
n/a
30
2,570
780
200
n/a
Plastic mold/casting machine operators/technicians Production/operations first line supervisors Systems analysts
920
200
n/a
n/a
530
310
340
n/a
5,620
750
70
60
3,770
1,800
1,800
60
6,350
1,400
n/a
320
4,710
3,110
520
40
Tool/die makers Total, all occupationsc
830 1,421,350
120 277,880
n/a 35,350
n/a
750
220
190
n/a 46,550
32,420 1,078,180
627,850 219,380
a.Figure obtained from Arizona Department of Economic Security, Research Administration (February 2000), available from www.de.state.az.us/link/economic/webpage/page6.html. b.Figure provided by Jim Van Geffen, Texas Workforce Commission, May 9, 2000. c.These totals include additional occupations not listed in this table.
Source: U.S. Department of Labor, Bureau of Labor Statistics, "1998 Metropolitan Area Occupational Employment and Wage Estimates, Occupational Employment Statistics, Bureau of Labor Statistics" (February 4, 2000), available from http://stats.bls.gov/oes/state/. 30
An Evaluation of Arizona's Competitiveness
Grupo Mexico has been actively exploring the establishment of its corporate headquarters in Tucson. Development officials are hopeful that a move by Grupo Mexico coupled with the consolidation of Phelps Dodge's corporate headquarters in Phoenix will provide Arizona with one of the highest concentrations of copper mining executives in the world.4
Maquiladora Employment
Information on the total distribution of employment by occupational classifications for specific maquiladora plants in San Luis R�o Colorado, Sonora, south of Yuma, is provided in table 5.3. Daewoo Electronics de Mexico is the largest employer with 2,300 workers, followed by BOSE (1,200), Exportex-Secci�n Lavander (1,100), and Exportex de Mexico (1,050; if the two Exportex divisions are combined, Exportex ranks second). As is true in the maquiladora industry in general, the workforce is concentrated in production. TSE is unique in that, with only 320 employees, it has the second highest number of workers employed as technicians (102).5 Figure 5.3 indicates that the distribution of employment in Tijuana maquiladoras is similar to that of San Luis R�o Colorado. TABLE 5.3: MAQUILADORA EMPLOYMENT IN SAN LUIS R�O COLORADO, SONORA Company Name AM-MEX Brake BOSE C�a de Juguetes Mexicanos Daewoo Electronics de M�xico Daewoo Electro Components M�xico Devanish de M�xico Exportex de M�xico Exportex de M�xico (Secci�n Lavander) Fashion Fabrics Hyo Seung de M�xico Industrias Frenco J. Marcel de M�xico Lonta de M�xico Manufactura y Rep. BCJ Mecox Resources Moreno Manufacturas Olguita de M�xico Paul-Son Mexcana Continue Table 5.3 on page 32 Administrators 4 250 78 300 37 7 80 55 10 6 7 7 10 3 18 4 9 21 Technicians 1 60 22 300 28 7 50 40 8 3 2 4 1 0 77 2 7 40 Laborers 43 890 385 1,700 315 231 920 1,005 69 132 18 289 72 14 52 34 759 439 Total Employees 48 1,200 485 2,300 380 245 1,050 1,100 87 141 27 300 83 17 147 40 775 500
An Evaluation of Arizona's Competitiveness
31
Company Name Poder Uno de M�xico Prestig�o de M�xico R�o Colorado Textil SANA International San Luis Textil Contractors SEHIWA Sirenamex Sportif de M�xico TSE de M�xico Total
Administrators 35 21 2 40 1 5 8 6 30 1,089 (9.4%)
Technicians 35 17 0 10 2 4 38 54 102 963 (8.3%)
Laborers 730 162 9 220 37 41 227 169 188 9,446 (82.2%)
Total Employees 800 200 11 270 40 50 273 229 320 11,498
Source: San Luis R�o Colorado Direcci�n de Desarrollo Econ�mico y Turismos, San Luis R�o Colorado, Sonora: Strategic Convergence Location/Punto de convergencia estrat�gica, (n.d.), p. 25. FIGURE 5.3: TIJUANA MAQUILADORA EMPLOYMENT
Administrative
Technical
Line Operators
Source: San Diego State University Institute for Regional Studies of the Californias, "Tijuana, Basic Information," p. 5; www.rohan.sdsu.edu/~irsc/tjreport/tj5.html.
Educational Attainment
According to a 1999 report by the Milken Institute, leading locational factors for high-technology operations were the presence of a trained and educated workforce, proximity to superior educational institutions, an existing supplier base, and amenities associated with a high quality of life. The study's authors emphasized that state and local government investments in workforce development not only assist the companies currently in the region, but can serve as an impetus for new economic development. Based on their findings, the most significant and common characteristic of successful areas was a high percentage of college graduates in the population.6 32
An Evaluation of Arizona's Competitiveness
Exemplifying these findings is the role of the University of Arizona's Optical Science Center. Founded in 1964, the center leads other U.S. institutions in the number of optical science graduates. Tucson--with more than 120 optics firms, many of which were founded on technology generated from the center--boasts one of the highest concentrations of optical science talent nationwide.7 Based on census data on college educational attainment, figure 5.4 indicates that San Diego, Tucson, and Phoenix stand out relative to the other communities. Among the smaller communities, Douglas shows high attainment levels in this category, again probably due to the proximity of Fort Huachuca (see table 5.4) . FIGURE 5.4: COLLEGE EDUCATIONAL ATTAINMENT PERCENTAGES BY REGION
30
25
25 20 15 10 5 0
23 22 19 16 15 13 11 10 9
San Tucson Phoenix San Douglas El Paso Yuma Diego Antonio
Laredo Nogales Calexico
Source: U.S. Census Bureau, 1994
TABLE 5.4: ESTIMATED ENROLLMENT IN INSTITUTIONS OF HIGHER LEARNING Community San Diego Phoenix San Antonio Tucson Laredo El Paso Calexico Yuma Douglas Nogales Enrollment 284,082 207,462 72,267 70,314 50,430 33,527 7,789 6,489 4,394 80
Sources: For Phoenix: City of Phoenix, Community and Economic Development Department, "Phoenix: Marketplace Facts and Figures." Greater Phoenix Economic Council, "GPEC Fact Book" www.gpec.org. For Tucson: Records Office, Tucson University; Academic Center, Chapman University; Administration, Phoenix University; DavisAn Evaluation of Arizona's Competitiveness
33
Monthan site, Park College; IPEDS Opening Fall Enrollments, The University of Arizona; Institutional Research, Pima College. For Yuma: Statewide Academic Programs, Northern Arizona University; Off-Campus Academic Programs, Southern Illinois University; Registrar's Office, Arizona Western College; Registrar's Office, Webster University. For Nogales: Statewide Academic Programs, Northern Arizona University; Institutional Research, Pima Community College. For Douglas: Admissions Office, Cochise College; Student Services, Western International University; Statewide Programs, Northern Arizona University; The University of Arizona�Douglas Campus coordinator; Institutional Research, Pima College. For San Diego: San Diego Regional Economic Development Corporation. For Calexico: Admissions Office, Imperial Valley College; Registrar's Office, San Diego State University�Calexico; National University, Marketing and Student Services Office. For San Antonio: San Antonio Economic Development Foundation. For El Paso: Greater El Paso Chamber of Commerce. For Laredo: Laredo Development Foundation. Available enrollment data for the Mexicali region indicate that approximately 25,000 individuals were enrolled in an institution of higher learning in 1999 (Table 5.5). TABLE 5.5: ESTIMATED ENROLLMENT IN INSTITUTIONS OF HIGHER LEARNING IN THE MEXICALI, BAJA CALIFORNIA REGION, 1999 Institution Universidad de Baja California Instituto Technol�gico de Mexicali CE California TI CETYS University CONALEP II CONALEP/Ejido Pueblo Estimated Enrollment 15,000 5,000 3,000 1,500 450 120
Source: "Background Info: About Mexicali," Twin Plant News 14, no. 12 (July 1999), 53.
Educational Activities and Initiatives
The state of Arizona has undertaken initiatives to increase local educational opportunities and improve the skill level of the workforce. During 1999 Governor Jane Dee Hull and university leaders from around the state of Arizona met with Mexico's education secretary to discuss further collaboration in the areas of academic credit transfers, faculty and student exchanges, and joint research in business, trade, science, and engineering.8 Given significant labor shortages in the agricultural, tourism, and service industries as well as the rise in illegal immigration, the governor of Arizona is proposing a short-term revival of the guest worker program. The program would allow non-immigrant guest laborers to apply for foreign labor assistance through the existing H-2 visa programs. The cumbersome administrative requirements for these programs would be expedited by an efficient system based on a universal biometric work authorization card to provide proper documentation for immigrant workers. In addition, the proposal calls for using labor shortages as a criterion for certifying workers, making visas extendable, and adopting a fast-track employer certification process.9
Phoenix Area
For the fifth consecutive year, the American Graduate School of International Management (Thunderbird) was rated the top school in the nation for international business according to the April 2000 U.S. News & World Report rankings of the best graduate schools. Among schools of business, irrespective of specialization, Thunderbird was rated 34th overall, behind the University of Arizona (31st) and Arizona State University--Main Campus (32nd).10 Thunderbird is one of twenty-six schools in the nation to be designated a Center for International Business Education and Research 34
An Evaluation of Arizona's Competitiveness
(CIBER). The curriculum for the master's program in international management is being revised for the 2000-2001 academic year. While retaining the traditional scope of international studies, modern languages, and world business requirements, students are now required to choose a regional focus, specialize in a course of study, and complete a "capstone," or applied coursework in the chosen specialization.11 Thunderbird offers a number of executive education programs targeting industry leaders, which include:
l l l l l
Global management executive education programs Executive education partnerships Custom-designed programs Language and culture training Executive master's degree program12
Arizona State University's Bank One Economic Outlook Center provides sophisticated statistical modeling and computer-based planning as a public service. Established in 1985 and named for Bank One in 1997, the center publishes the Consenso de Pron�sticos Econ�micos (Mexico Consensus Economic Forecast) on a quarterly basis. Leading Mexican experts provide an analysis and forecasts on the economy of Mexico.13 Arizona State University directed a collaborative effort with the University of Arizona to survey maquiladoras along the Arizona-Sonora border. The study findings suggested that the plants were utilizing lean manufacturing techniques to compete on price, quality, and delivery issues. Another key finding was that firm executives anticipated moving toward greater sourcing of supplies and components from the local markets.
Tucson Region
The University of Arizona is engaged in a host of activities to enhance regional linkages with the states of Sonora and Sinaloa as well as to provide instruction that prepares students for an increasingly globalized trade environment. Notable activities include the following:
l
On October 7-8, 1999, the University of Arizona's new president led a delegation of department heads, faculty members, and administrative officials to meet with the rector of the University of Sonora. The visit to Hermosillo yielded information on Mexico's higher education system, meetings between faculty members to discuss collaborative research, and a formal signing of a convenio (agreement) between the two institutions. The convenio builds on efforts by previous presidents to formalize relationships between the two universities. The disciplines targeted for cooperation were water research, environmental studies, economic development, agriculture and food production,and engineering. Faculty members from the University of Arizona expressed an interest in reciprocal adjunct faculty opportunities, a brochure to stimulate transboundary study programs between student populations, and agreements regarding access to archaeological sites in Sonora.14 In the past, the University of Arizona Agricultural Extension staff have worked with Sonoran colleagues on agricultural producer outreach and training programs. As part of the university-coordinated Arizona-Sonora Project, which promotes binational planning, researchers from Arizona and Sonora completed a comprehensive study of the agricultural industries in each state, which included the identification of the economic complementarities that would facilitate transboundary integration in this sector. Arizona-Sonora Agribusiness Cluster: Analysis and Recommendations for Development served as the blueprint for the creation of a binational industry cluster organization that seeks to enhance the competitive position of the two states. 15 The Southwest Border Technology Project (SWBTP) is a partnership between the University of Arizona and the National Institute of Justice Office of Science and Technology. Utilizing resources at the University of Arizona Science and Technology Park, this new initiative aims to establish a platform for the identification and implementation of technologies to expedite cross-border commercial transactions and support the interception of illegal conveyances. In addition to operating several test beds to determine the feasibility of specific technologies,
An Evaluation of Arizona's Competitiveness
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l
35
the project will act as a clearinghouse for inspection and detection technologies and maintain a comprehensive technology database.
l
BorderPACT is a network to foster change and collaboration among border institutions of higher education in the U.S.-Mexico borderlands.16 In 1999, with sponsorship from the Ford Foundation, BorderPACT awarded $60,000 in grants to recipients along the U.S.-Mexico border. Funded projects included construction of a satellite medical clinic, community outreach to educate immigrants on their legal rights and responsibilities, identification of culturally appropriate speech and language treatment techniques for Mexican children, and translation of an environmental curriculum into Spanish for sixth-, seventh-, and eighth-grade students. 17 Working in tandem with this network is the Consortium for North American Higher Education Collaboration (CONAHEC), whose executive director is based at the University of Arizona. CONAHEC serves as the lead agency in the administration of the trinational system fostering improved academic cooperation in North America. 18 The second annual Border Academy, hosted by the Mexican American Studies and Research Center at the University of Arizona was held over two weekends in July 1999. The academy focused on border health issues during the first weekend session and concluded the following weekend with a session on economic development issues. The health session focused on health status, health systems, and community-based health projects along the border. In the discussions on economic development, participants explored issues concerning NAFTA's impact on Canada, importation and exportation of winter produce, transportation, immigration and the maquiladora industry. Presenters from Germany and Poland highlighted a global perspective to borderland development issues.19 Undergraduates in the University of Arizona College of Business and Public Administration are offered a supplementary program to enhance their understanding of international business transactions. The International Business Certificate Program (IBCP) consists of foreign language instruction and coursework in international business subjects, such as accounting, trade theory, finance, management, information technology, and political risk and intelligence analysis. Another component of the program is an academic year internship with an internationally active business in Tucson.20 The University of Arizona recently was one of four schools receiving a $400,000 grant from the Alfred P. Sloan Foundation to prepare students for private-sector employment. The grant provides seed money to schools that are attempting to create a link between educational instruction and industry. Starting in the fall of 2000, faculty from the College of Science and the College of Business and Public Administration will offer a professional master's degree in applied bioscience, mathematical science, and applied and industrial physics. An industry advisory board that included representatives of Raytheon and Motorola guided curriculum development.21 The National Law Center for Inter-American Free Trade, located in the University of Arizona College of Law, is leading an effort to establish legal principles for conducting e-commerce across international boundaries. In September 1999, the center hosted a meeting of representatives from Canada, the United States, and Latin America to identify key obstacles to e-commerce trade with specific attention to Latin America.22
l
l
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l
Like the University of Arizona, Pima Community College is initiating strategies to address opportunities and challenges for international commerce and high-tech development.
l
The International Business Studies Advisory Committee at Pima Community College is developing a Center for International Studies to be located at the West Campus. In conjunction with the Technological Institute of Sonora (ITSON), the international business faculty will have 20 ITSON students take courses at the college during the summer of 2000. In addition to establishing a course on e-commerce, the International Business Studies program will be offering expanded instruction on cultural differences management, international economics, and globalization. The college, which currently offers an associate degree in international business, is developing an international business certificate program.23 A new program at the Pima College West Campus is preparing minimum-wage workers to be electronics technicians. In addition, the Downtown Campus provides instruction in machine tool technology through a partnership with the National Tooling and Machining Association apprenticeship program. 24 A significant chal lenge for the college has been retaining the 150 to 230 students who enroll each semester for the machine tool
l
36
An Evaluation of Arizona's Competitiveness
technology degree program. A lead instructor for the program indicates that, with a shortage of skilled machinists in the region, industrial demand is prompting students to begin working prior to completing their degree.25
l
Recently the college signed a 30-year lease with the Tucson Airport Authority (TAA) to build a 40,000-squarefoot hangar for its aviation program.26 The agreement underscores airport officials' concerns that the most serious challenge before Tucson is providing trained people to fill new jobs. TAA representatives indicate that the potential exists for significant employment increases in the local aerospace industry.27 A sizeable challenge to training efforts in Tucson and other communities in the state is that Arizona allocates significantly less money for customized training programs than do California and Texas. In 1999, Arizona funding totaled $5 million, in comparison to $117.2 million in California and $66.5 million in Texas. Arizona legislative appropriations for 2000 and 2001 reflect incremental increases to $6 million and $7 million over the two years. 28 The Department of Labor awarded Pima County Community Services a $788,000 federal grant to assist nonEnglish-speaking job seekers in obtaining marketable skills and to increase the pool of qualified workers. The grant--a collaborative effort by Pima County, the city of Tucson, the University of Arizona, and Pima Community College--will target Arizona participants, largely dislocated workers, for career-track health-care training and language proficiency instruction. This pilot project will run for two years.29 At the K-12 level, industry leaders advocated that the Tucson Unified School District choose as its new superintendent someone committed to public-private workforce development programs. Citing the need for students who can fill all employment levels in high-tech industries such as optics, information and computer technology, and aerospace, industry representatives stress that high-school graduates must acquire at least some technology skills. Every graduating student should have achieved computer literacy, proficiency with various computer programs, and the ability to access the Internet.30
l
l
Yuma Region
The College of Business Administration at Northern Arizona University--Yuma Campus, is offering students internship opportunities with firms in Mexico to help them develop the critical insights and skills needed to perform effectively in a global environment. Following instruction in comparative business practices and intensive business Spanish, students spend an academic semester working in a maquiladora, a small business, or a nonprofit organization in San Luis R�o Colorado, Sonora. Several companies and organizations, including BOSE Corporation and Canacintra, have participated in the program. 31 Acknowledging the vital role that educational achievement plays in the economic success of their region, representatives of Northern Arizona University are initiating an analysis of the training requirements of the maquiladora sector in Sonora and of local manufacturing and distribution service companies. A public- and private-sector effort, the analysis could gauge industry support for training programs in the areas of customs clearing, freight forwarding, and supply chain management.32 Moreover, future training programs would seek to complement the training efforts already underway by Sonoran academic institutions and the maquiladoras themselves. The University of Phoenix recently opened an instructional site that provides business degree programs for working professionals in the Yuma region.
Nogales Region
A ballot initiative in the Nogales region sought voter approval for a provisional community college. The steering committee for this initiative is designing an educational program that would train the local workforce for high technology. Economic developers report that Nogales has an abundance of unskilled and semi-skilled labor. The college would provide an invaluable resource for community members who currently have to travel outside the region to obtain this level of instruction.33
An Evaluation of Arizona's Competitiveness
37
Douglas Region
Economic developers in Sierra Vista have partnered with Fort Huachuca to design a recruitment marketing program to attract skilled workers, such as engineers and technicians, from Tucson and other areas across the nation. This recruitment initiative is being funded through corporate sponsorship. In their recruitment efforts, city officials underscore the advanced technology developments at Fort Huachuca and locational advantages such a low crime and cost of living indices. 34
San Diego Region
Notable initiatives in the San Diego region are being undertaken by the University of California system, the California State University system local community colleges, the K-12 school system, and public-private partnerships. Many involve collaboration with similar institutions in Baja California. The University of California, San Diego established the Center for U.S-Mexican Studies in 1979 to support a broad range of research. Research priorities established for the year 2000-2001 are political transitions in Mexico, political and social consequences of Mexico's economic restructuring, Mexican environmental policy, the economic and political dimensions of North American integration, Mexican migration to the United States; and judicial reform, public security, and law enforcement in Mexico.35 The University of California, San Diego, School of Business Administration, in partnership with the Division of Continuing Education, offers a Certificate in International Business. Faculty members team with industry leaders and government officials to provide instruction in international finance, marketing, and business strategy. The program, which comprises seven 12-credit-hour classes, features information on negotiations, import and export strategies, legal issues, and a course on international e-commerce. 36 San Diego State University is one of 25 schools designated by the U.S. Department of Education as a federally supported national center of excellence in international business. CIBER, the Center for International Business Education and Research at that university, is the largest program of its kind in the United States. The MEXUS program, a component of the center, is marketed as "preparing for business without borders." In partnership with Southwestern College, Centro de Ense�anza T�cnica y Superior, and the Universidad Aut�noma de Baja California, MEXUS attempts to meet industry demands by internationalizing management education. The first binational undergraduate dual-degree program in the United States, the MEXUS Program features a semester-long or year long stay in Chile, Spain, Ecuador, or Mexico. A new partnership with the Instituto Technol�gico y de Estudios Superiores de Monterrey (ITESM), which has 26 campus in cities throughout Mexico, enables students to study in a wider array of places. MEXUS is developing dual-degree programs with six additional countries: Russia, China, Japan, Brazil, France, and Canada. A new trinational program sponsored by MEXUS, Project North America (PNA) is designed to increase mobility in North American higher education and enhance the human resource structure in the region. Student participants study in both Mexico and Canada. The "Progress Report to Implement a New Border Vision," which was presented at a meeting between the presidents of the United States and Mexico, recognized MEXUS along with 15 other programs as a binational model of educational cooperation and collaboration.37 The Institute for Regional Studies of the Californias (IRSC), established at San Diego State University in 1983, conducts extensive applied research on environmental, regional, and transborder planning issues. As part of its mission to serve as a forum for the discussion and dissemination of information on the border region of California and Baja California, IRSC publishes the Border Studies and Border Issues series and Mexico Policy News. Deficits in primary and secondary education are affecting not only the future workforce but the current workforce as well. Although a facility expansion by Applied MicroCircuits Corp, a leader in high bandwidth silicon for optical networks, underscores San Diego's ability to attract engineering expertise, a CEO roundtable in 1999 indicated that many engineers with families were choosing other locations because of a perception that San Diego has a poor K-12 system.39 In an effort to improve the skill level of high school graduates, the San Diego Unified School Board approved the "Blueprint for Student Success" in March 2000. Proponents describe the strategy as unique because it allows for extended learning in areas such as literacy and mathematics and requires students to undertake a demanding 38
An Evaluation of Arizona's Competitiveness
curriculum. They based this proposal on U.S. Department of Education findings that the most important predictor of whether a student graduates with a degree was not grades or test scores, but rather the level of difficulty of high school c l a s s e s .4 0
Calexico Region
A low level of training in Imperial County has traditionally required the importation of skilled workers.41 With a significant portion of its workforce ill-equipped for technological advancements, Imperial Valley College is designing a workforce-training program to address twenty-first century needs. Citing a booming maquiladora industry and regional business growth to support that sector, college administrators have partnered with the Small Manufacturers Institute to obtain grants for education in entry-level to advanced manufacturing disciplines.42 Consisting of the Small Manufacturers Association of California, the California State Universities Institutes, and the Sandia and Lawrence Livermore National Laboratories, the Small Manufacturers Institute was formed to promote manufacturing jobs as a critical component of economic growth. With continued growth projected, workers with valuable skills will be increasingly in demand.43 In 1998, with initial funding from a U.S. Department of Agriculture Rural Development Enterprise Grant, the California Center for Border and Regional Economic Studies (CCBRES) was established to serve as a resource for Imperial Valley and the larger California--Baja California region. Located at the San Diego State University--Imperial Valley Campus, the center compiles trade statistics and maintains an economic profile of the county. CCBRES has produced reports on unemployment, population estimates and projections, state and local foreign trade, and research methodologies for a study to assess worker availability in Mexicali.44
Mexicali Region
In 1998, the Centro de Ense�anza T�cnica y Superior Universidad (CETYS) conducted a four-part study to assess the availability of workers in Mexicali. Researchers utilized a variety of methodologies to assess the demand for labor by local industries, including consulting federal data sources and undertaking extensive interviews with plant managers, employees, and the general public. The findings indicate that Mexicali has a sizeable labor force pool; however, many of the unemployed were not working because they required flexible hours, child care, part-time employment, or were over 50.45 Seeking to make Mexicali a world-class industrial city, educators there have designed a linkage program to meet specific industry needs. This program includes a stated goal of creating a culture or attitude that generates professional and technical development in the areas of engineering, welding, metalwork, and plastic injection molding. To support this initiative, maquiladora managers are enlisted to provide instruction. Additional activities consist of custom technical training in specific applications and summer employment of instructors in maquiladoras so they can acquire information on current industry practices. 46 A regional committee of local schools is also implementing a pilot project to provide instruction on computer applications.47
San Antonio Region
As part of the "city-base" concept, Brooks Air Force Base signed a memorandum of understanding with Texas A&M University to create a center to study environmental challenges along the U.S.-Mexico border. The Frank M. Tejeda Center for Excellence in Environmental Operations is the result of an effort to stimulate greater research linkages among universities, industry, and the Air Force. Researchers will direct their attention to water and wastewater pollution prevention and provide outreach through education, training, and leadership development on border issues. City officials, noting that the base is an environmental research hub for the defense department, are optimistic that the partnership will generate new employment and wealth. 48 Northwest Vista College, a two-year institution, offers associate degrees in a variety of high-tech programs. The school graduated 14 students in 1999 with associate of applied science degrees in semiconductor manufacturing technology.49
An Evaluation of Arizona's Competitiveness
39
El Paso Region
El Paso city officials indicate that the most significant challenge facing their region is workforce development. Since the implementation of NAFTA, more than 50 major employers reportedly have either downsized or relocated from El Paso. Hispanic women over 30 who have less than a sixth grade education make up the majority of displaced workers in the region.50 With high levels of displaced workers who lack the necessary skills--such as English proficiency, a high-school diploma, and vocational training--to transfer into other occupational areas, particularly the growing teleservices field, the city hired consultants to prepare a strategic adjustment plan. Completed in December 1999, "A Vision for Tomorrow's El Paso: Economic Adjustment Strategic Plan" includes a workforce development recommendation to refocus programs toward an employer-driven approach with greater linkages to new and existing businesses. The consultants recommended that several steps be taken, including a review of current programs, a survey of the employment needs of El Paso businesses over the next year, and creation of a customer service training program at El Paso Community College.51 Several other workforce development programs are affiliated with the University of Texas at El Paso and El Paso Community College. The University of Texas at El Paso offers a bachelor of arts degree in business administration. Courses include international accounting, economics, and finance. In addition, students take classes on the economics of Latin America and Mexico, international management, and marketing. The Texas Manufacturing Assistance Center (TMAC), affiliated with the U.S. Department of Economic Development National Institute of Standards and Technology, is a one-stop shop for small to medium-sized manufacturers. In addition to fostering partnerships between manufacturers and the research community, the University of Texas at El Paso, TMAC provides opportunities for university students to obtain hands-on experience working for these local manufacturers.52 El Paso Community College, which is recognized for its workforce training efforts, offers a customs broker license preparation program. This program prepares students for careers in international trade through study of U.S. customs laws, importing and exporting, license preparation courses, global freight forwarding, and how to start a customs brokerage business.53
Laredo Region
Like many other communities along the U.S.-Mexico border, Laredo has a large number of unskilled workers. Economic developers emphasize that education must play a key role in creating a marketable labor force in Laredo. A trained workforce can not only attract industry but can raise the standard of living for the community.54 With only 47 percent of the student population graduating from high school and only 11 percent graduating from college, economic professionals are supporting career technology programs in the public schools.55 Playing a lead role in the effort to develop a skilled labor pool are the Texas A&M International University College of Business Administration and the Graduate School of International Trade (COBA/GSITBA). Graduate-level instruction is provided in business administration in the areas of international banking, international logistics, and information systems. A number of traditional business administration courses in finance and accounting are offered at the undergraduate level.56 Through a variety of programs, COBA also publishes monthly digests on border statistics (Border Business Indicators) and NAFTA-related issues (NAFTA Digest). In 1994, the university established the Border Trade Institute to collect U.S. customs import and export data at the five-digit SITC level for ports along the U.S.-Mexico border. The Office for the Study of U.S-Mexico Trade Relations (USMTR) maintains articles from a variety of press sources in an on-line searchable database. Since 1994, this institute has expanded to provide specialized information on agricultural issues through the Center for North American Studies in the U.S. Department of Agriculture. 57
40
An Evaluation of Arizona's Competitiveness
Maquiladoras and Regional Supplier Development
Profile and Growth of Maquiladoras
During the last century the development of the maquiladora industry in Mexico ranks among the top outstanding economic events for the country. By the end of 2000, the industry expects to reach 3,700 plants and an employment level of 1,300,000 workers for an annual 8 percent growth rate. A recent survey by the Asociaci�n de Maquiladoras de Sonora (AMS) found that membership anticipated a 20 percent growth in direct labor by the end of 2000. Textiles, electrical and electronic materials, and other manufacturing sectors make up the bulk of the industrial activity for maquiladora plants in Mexico. Furniture and parts, automotive equipment, and chemical products are other important production efforts (Figure 6.1). FIGURE 6.1: PERCENTAGE OF MAQUILADORAS BY INDUSTRY ACTIVITY
Services Other Manufacturing Sectors Food Processing
Textiles
Toys & Sporting Goods
Electrical, Electronic Materials Electrical, Electronic Machinery Equipment and Tools Automotive Equipment Shoes & Leather Goods Furniture & Parts Chemical Products
Source: "Maquila Scoreboard," Twin Plant News, May 2000, p.71.
As indicated in figure 6.2 the largest concentration of maquiladora plants is in the state of Baja California, followed by Chihuahua and Tamaulipas. Although Sonoran maquiladoras make up only 9 percent of the industry in Mexico, compared to other Mexican states Sonora experienced one of the highest percentage increases in the number of maquiladora plants between 1998 and 1999. During this year, the number of plants in Guadalajara increased by 50 percent, followed by three communities in Sonora--Nogales (29.6 percent), Hermosillo (28.6 percent), and Guaymas (23.5 percent)--and Ensenada, Baja California (23.5 percent; Table 6.1). Between 1998 and 2000 Nogales, Sonora, experienced a considerable increase (48 percent) in the number of maquiladoras, from 81 to 120. Employment grew nearly 20 percent between 1998 and 2000, to an estimated workforce of 38,283 in June 2000. Double-digit growth occurred in Matamoros (19.1 percent), Ciudad J�arez (14.7 percent), and Tijuana (10.7 percent). Agua Prieta, at 6.5 percent, was among several communities (Monterrey, Mexicali, Ciudad Chihuahua, and Nuevo Laredo) that showed more modest increases. Over the longer term, however, Mexicali has experienced dramatic growth in maquiladora employment. Between 1995 and 1999, maquiladora employment increased 100.4 percent, even though Mexicali continues to have substantially fewer firms than Tijuana (184 to 737). Regional reports attribute this growth to the relocation of large firms into the area.1 San Luis R�o Colorado was noteworthy as the only community listed to experience a decrease (-3 percent).
An Evaluation of Arizona's Competitiveness
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FIGURE 6.2: PERCENTAGE SHARE OF MAQUILADORA PLANTS IN SELECTED MEXICAN STATES, 2000
Baja California Other states
Tamaulipas
Sonora Chihuahua Nuevo Le�n Coahuila
Source: "Marquila Scoreboard," Twin Plant News, May 2000, p.70.
TABLE 6.1: PERCENTAGE CHANGE IN NUMBER OF MAQUILADORAS, 1998 TO 1999] Community Tijuana Ciudad Ju�rez Mexicali Matamoros Monterrey area Reynosa Nogales Ciudad Chihuahua Ensenada Ciudad Acu�a Nuevo Laredo Piedras Negras Hermosillo San Luis R�o Colorado Agua Prieta Guadalajara Guaymas Maquiladoras 1998 666 252 172 115 120 99 81 76 68 54 53 44 42 33 31 22 17 Maquiladoras 1999 737 289 184 137 130 111 105 81 84 57 54 44 54 32 33 33 21 Pct. Change 19981999 10.7% 14.7 7.0 19.1 8.3 12.1 29.6 6.6 23.5 5.6 1.9 0.0 28.6 -3.0 6.5 50.0 23.5
Sources: "Maquila Scoreboard," Twin Plant News, November 1998, p. 63; "Maquila Scoreboard," Twin Plant News, November 1999, p. 71.
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An Evaluation of Arizona's Competitiveness
Regional Activities and Initiatives
Efforts to increase the number of regional producers and suppliers, and the linkages between them, are underway in every community explored in this report. An increasingly popular strategy is trade shows, which feature the products and services of regional suppliers and the sourcing needs of maquiladoras and other industries in the area. Ninetyseven expositions were tentatively scheduled during the calendar year 2000 in Monterrey, Nuevo Le�n.2 Table 6.2 highlights some of the most popular trade shows occurring in the U.S border region and Mexico. TABLE 6.2: TRADE SHOWS AND EXPOS IN THE U.S.-MEXICO REGION ENVIROMATCH MEXPORT 2000 ANIPRON Trade Show Borderland Tradeshow Expo Industrial 2000 Vision 2000 Nogales Expo ADOC International Trade Seminar NAFTASHO 2000 EXPO Obreg�n 2000 Southern AZ/Sonora International Business Expo Plasti Imagen Show Match Mex 2000 Guadalajara, Mexico Otay Mesa, California Mexico City El Paso, Texas Hermosillo, Sonora Laredo, Texas Nogales, Sonora Tucson, Arizona Calexico, California Ciudad Obreg�n, Sonora Tucson, Arizona Mexico City Mexico City November 1999 February 2000 February 2000 March 2000 March 2000 March 2000 April 2000 April 2000 April 2000 May 2000 July 2000 September 2000 September 2000
Sources: 2000 trade show calendars from Office of International Business, CINTERMEX, SECOFI, Arizona Department of Commerce, and states of Coahuila, Tamaulipas, New Mexico, California, and Baja California Norte.
Survey of Sonoran Maquiladoras
Recognizing the potential impact of maquiladoras on a region, a team of researchers from Arizona State University and The University of Arizona surveyed production-sharing plants in Sonora, Mexico. The study indicated that these world-class manufacturers are competing on price, quality, and on-time delivery. Many are full-service production facilities and many are implementing lean manufacturing techniques, such as ISO 9000. Of particular interest, maquiladora managers reported that although they are becoming more independent in their decision-making structures, purchasing is still controlled in large part by the parent companies. The respondents noted that the existence of suppliers was not a critical factor in their company's decision to locate in Sonora, although most respondents did anticipate an increase in local purchases from both Arizona and Sonora suppliers. The study concluded with the following recommendations:
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Establish a cross-border maquiladora industry cluster organization to provide linkages between suppliers and maquiladoras. This group would address workforce, transportation, and policy issues Design a marketing plan that includes visits with parent companies outside of Arizona to encourage increased use of local suppliers and further maquiladora development
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An Evaluation of Arizona's Competitiveness
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Assist regional suppliers in developing competitive strategies for just-in-time production, in improving performance with information technologies, and in obtaining quality certifications such as ISO 9000. Enhance infrastructure and efficiency of border crossing through common priorities and lobbying efforts between regional economic developers and maquiladora parent companies in Arizona. Integrate workforce development needs of maquiladoras into the economic development plans for the region.3
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Initiatives in the Tucson Region
The Tucson-Mexico Project of the city of Tucson continues to implement its Maquiladora Supplier Program, which focuses on increasing Tucson-area purchases by the Mexican maquiladora industry. In its first year the program exceeded expectations: Eight contracts were awarded to Tucson companies with an estimated value of $618,000. In total, Tucson manufacturing supplier companies submitted to maquiladora plants 22 bids worth more than $3 million. In an effort to increase supplier linkages, program staff has been attending trade shows and have been working with the Greater Tucson Economic Council to attract companies to Tucson to supply the maquiladora industry. Targeted suppliers include zinc die casting, industrial plating, and high-volume thermoset plastics companies. 4 In November 1999, the Tucson-Mexico Project collaborated with the Agua Prieta Chamber of Commerce to bring 40 private-sector representatives from Tucson to Agua Prieta to explore complementarities between the maquiladora industry and the supplier base in Tucson.5 In March 2000, the Tucson-Mexico Project hosted the Expo Industrial 2000 in Hermosillo, Sonora. This international trade show featured nearly 100 businesses and reportedly drew approximately 4,300 visitors from around the world. Representatives of seven Tucson companies traveled with project representatives to participate in matchmaking opportunities between suppliers and maquiladoras. The organizers envision a more cost-effective and timely maquiladora supply delivery system as a result of the exposition. An estimated 96 percent of the supplies sourced by maquiladora plants in Mexico are purchased from outside the local region. These purchasing patterns lead to costly freight charges and delays.6 The Tucson-Mexico Project is a critical resource for Tucson-based companies seeking a relationship with clients in Mexico. A box company headquartered in Tucson entered the maquiladora supplier market by opening a new plant in Nogales, Sonora. By manufacturing corrugated cartons in Mexico, the company claims to have attracted nearly a dozen new clients, provided jobs for more than 30 workers, and established an advantage over competitors, namely their ability to serve the Mexican counterparts of their clients--Xerox, General Instruments, BOSE, ACCO, and Master Lock--more efficiently. The firm's Tucson operation performs warehousing, distribution, and design functions, while the plant in Sonora provides the vast majority of handwork and assembly functions.
Initiatives in the Yuma Region
The Yuma Proving Ground (YPG), described as one of the largest military installations in the world, is attempting to develop supplier and development relationships with regional industries and academic institutions. The Desert Testing and Training Facilities, a critical component of the installation, conducts an average of 100 tests at any given time on helicopter armament, long-range artillery, and main battle tanks. Each year more than 50 units from around the nation come to the Proving Ground to train at the Military Freefall School, part of the John F. Kennedy Special Warfare Center, which specializes in freefall parachuting techniques. Because the military installation requires a wide spectrum of supplies and services to maintain its sophisticated array of technology-based equipment, local economic developers in partnership with the YPG are seeking ways to enhance regional sourcing expertise.7 Development officials in San Luis R�o Colorado, Sonora, approximately 20 miles south of Yuma, have developed a sophisticated bilingual marketing brochure in order to attract U.S. investment. The brochure emphasizes the community's strategic location, its efforts to modernize, and the existence of a qualified labor force. Noting that national and foreign investors have found their community a fertile ground for establishing manufacturing operations, the document highlights additional factors such as plenty of level terrain, electricity, and water.8
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An Evaluation of Arizona's Competitiveness
The featured speaker for the session on small business opportunities in Mexico at the fourth annual Desert Pacific Regional International Trade Show and Conference was a businessman who had established a NAPA Auto Parts operation in San Luis R�o Colorado. He outlined the procedures for opening a retail business in Mexico. They include:
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Engage a Mexican attorney who is also a notary public and a Mexican accountant. Ensure that both are familiar with the procedure for setting up alien businesses. Acquire a U.S. passport, a process which may require two to four weeks. Acquire a Mexican visa at the Immigration Office for approximately $125 U.S. dollars. By actually traveling to the border office, he received his documents in less than a week. Obtain for your business the Articles of Incorporation, known in Mexico as Anonymous Society. This process can be complex and time consuming, in some cases taking as long as a year if there are inaccuracies on the form. By obtaining a copy of the Articles of Incorporation of a similar business, and using them as a model, this individual was able to complete the task in one day. After obtaining Articles of Incorporation and a legal identity, obtain a Federal Tax ID number, a process estimated to take two weeks. New businesses are encouraged to join SECOFI, the federal chamber of commerce in Mexico, in order to access useful networking opportunities. Apply for a Social Security Tax ID number, which in this case was completed by the company's accountant in about one week. After securing a lease, obtain an Occupant's License, the equivalent of a business license, permitting one to conduct business.
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The handouts provided with this presentation indicated that the entire process took nearly six weeks to complete, since the speaker personally handled all the details. He estimated his out-of-pocket expenses at approximately 2000 U.S. dollars.
Initiatives in the San Diego Region
On June 15, 2000, the Otay Mesa Chamber of Commerce and the San Diego Regional Economic Development Corporation hosted the MEXPORT

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Full Text

An Evaluation An of Arizona's Competitiveness
The Arizona-Sonora Project
Marisa Paula Walker,
Office of Economic Development
Peter Likins, President Bruce A. Wright, Associate Vice President for Economic Development
D e c e m b e r 2000
Layout and Design: Biomedical Communications and Red Horse Graphics Editorial Services: Kirsteen E. Anderson
COPYRIGHT
�
2001 Arizona Board of Regents
ii
An Evaluation of Arizona's Competitiveness
Prepared for the
Arizona-Mexico Commission
1700 W. Washington, Suite 180 Phoenix, AZ 85007 Phone: (602) 542-1345 Fax: (602) 542-1411 www.azmc.org
The Arizona-Sonora Project
Jane Dee Hull, Governor, State of Arizona Armando L�pez Nogales, Governor, State of Sonora Margie Emmermann, Governor's Policy Advisor for Mexico, State of Arizona Jos� C�rdenas, President, Arizona-Mexico Commission W. Russell Knocke, Executive Director, Arizona-Mexico Commission Lic. Alfonso Molina Ruibal, President, Comisi�n Sonora-Arizona Lic. Luis Carlos Soto, Executive Director, Comisi�n Sonora-Arizona Bruce A. Wright, Project Director, The University of Arizona Gail Lewis Howard, Project Director, Arizona State University
An Evaluation of Arizona's Competitiveness
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An Evaluation of Arizona's Competitiveness
Contents
List of Tables ................................................................................................................. ..................................... v i List of Figures ................................................................................................................................................... v i i Acknowledgements ............................................................................................................... ............................. i x Introduction ........................................................................................................................................................ 1 Overview of the Evaluation ......................................................................................................................... 1 Research Methodology ........................................................................................................... ..................... 2 Key Findings from 1999 Evaluation of Arizona Competitiveness .................................................................... 3 Factors Contributing to Competitiveness .................................................................................................... 3 Summary of Findings .................................................................................................................................... 6 Where Arizona Could Capture a Larger Share of NAFTA Trade ................................................................. 9 Important Assets Arizona Should Market to Prospective Firms ................................................................ 1 1 Summary Observations ............................................................................................................................... 1 2 Growth in Trade to Mexico .............................................................................................................................. 1 3 Growth in Export Sales to Mexico ............................................................................................................. 1 3 Exports by Metro Area .......................................................................................................... ............................ 1 7 Export Trade Activity of Selected Southwestern Ports .............................................................................. 2 4 Skilled Human Resources and Labor Pool Development ................................................................................ 2 7 Labor Force and Industry Employment ..................................................................................................... 2 7 Maquiladora Employment .......................................................................................................................... 3 1 Educational Attainment .............................................................................................................................. 3 2 Educational Activities and Initiatives ........................................................................................................ 3 4 Maquiladoras and Regional Supplier Development ....................................................................................... 4 1 Profile and Growth of Maquiladoras .......................................................................................................... 4 1 Regional Activities and Initiatives ............................................................................................................ 4 3 Advanced Transportation Infrastructure ........................................................................................................... 4 9 Rail Transportation ..................................................................................................................................... 4 9 Air Transportation ...................................................................................................................................... 5 2 Highway Transportation ............................................................................................................................. 5 6 Border Ports of Entry .................................................................................................................................. 6 0 Initiatives and Strategies Underway to Enhance Trade with Mexico ............................................................. 6 3 Events, Trade Shows, and Conferences ........................................................................................... ........... 6 3 Export Assistance Programs and Initiatives ............................................................................................... 6 7 Trade and Protocol Missions ...................................................................................................................... 6 8 Strategic Planning Initiatives ................................................................................................. .................... 7 0 Concluding Observations ........................................................................................................ ......................... 7 7 Appendix ........................................................................................................................................................... 8 1 Export Trade Activity by City, 1999 .......................................................................................................... 8 1 Import Trade Activity by City, 1999 .......................................................................................................... 8 7 Notes .................................................................................................................................................................. 9 3
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Tables
Key Findings from 1999 Evaluation of Arizona Competitiveness 3.1. Competitive Advantages and Challenges to Economic Development, by City .................................. 4 3.2. Leading Site-Selection Factors Important to Survey Respondents ...................................................... 6 3.3. Leading Site-Selection Factors Most Often Judged Not Important ..................................................... 7 3.4. Leading Factors Respondents Consider Competitive in Existing Location ....................................... 7 3.5 Leading Community Location Factors Rated as Not Competitive ....................................................... 8 3.6. Evaluation of NAFTA-Related Competitiveness ............................................................................... .. 8 3.7. Economic Development Targets, by City ............................................................................................. 9 3.8. Key NAFTA-Oriented Economic Development Activities and Strategies, by City ........................... 1 0 Growth in Trade to Mexico 4.1. Top Five Merchandise Exports to Mexico, by Industry Sector, 1998 ................................................ 1 4 4.2. Change in Dollar Value of Selected Export Categories, 1993-1998 .................................................. 1 7 4.3. Change in Value of Exports by Metro Area, 199-1998 ....................................................................... 17 4.4. Change in Value of Exports by Metro Area, 1997-1998 .................................................................... 1 8 4.5. Top Metro-Area Exporters, 1997 and 1998 ................................................................................... .... 1 8 4.6. Percentage Change in Dollar Value of Exports, 1993-1998 and 1997-1998 ..................................... 1 9 4.7. Percentage Change in Merchandise Exports to NAFTA Countries and Mexico, 1993-1998 and 1997-1998 ................................................................................................................ 2 0 4.8. Merchandise Export Sales by Industry Sector, 1998 .......................................................................... 2 1 4.9. Percentage Change in Electric and Electronic Equipment Exports, 1993-1998 and 1997-1998 ..... 2 2 4.10. Percentage Change in Industrial Machinery and Computers Exports, 1993-1998 ......................... 2 2 4.11. Percentage Change in Scientific and Measuring Instruments Exports, 1993-1998 and 1997-199822 4.12. Percentage Change in Rubber and Plastic Exports, 1993-1998 and 1997-1998 ............................ 2 3 4.13. Percentage Change in Fabricated Metals Exports, 1993-1998 and 1997-1998 .............................. 2 3 4.14. Percentage Change in Primary Metal Exports, 1993-1998 and 1997-1998 .................................... 2 4 4.15. Export Trade by Leading Southwestern Ports, 1999 ........................................................................ 25 Skilled Human Resources and Labor Pool Development 5.1. City and County Civilian Labor Force Estimates, 1999 .................................................................... 2 7 5.2. Estimated Skilled Human Resources by Region, 1998 ...................................................................... 2 9 5.3. Maquiladora Employment in San Luis R�o Colorado, Sonora, April 1999 ....................................... 3 1 5.4. Estimated Regional Enrollment in Institutions of Higher Learning, Fall 1999 ................................ 3 3 5.5. Estimated Enrollment in Institutions of Higher Learning in the Mexicali, Baja California, Region, 1999 ..................................................................................................................................... 3 4 Maquiladoras and Regional Supplier Development 6.1. Percentage Change in Number of Maquiladoras, 1998 to 1999 ........................................................ 4 2 6.2. Trade Shows and Expos in the U.S. Border Region and Mexico ....................................................... 4 3 6.3. Maquiladora Employment, Output, and Productivity in Baja California, 1997 ............................... 4 6 Advanced Transportation Infrastructure 7.1. Dollar Value of Southbound Rail Freight, 1994-1999 ....................................................................... 4 9 7.2. Dollar Value of Northbound Rail Freight, 1994-1999 ....................................................................... 4 9 7.3. Dollar Value of Southbound Truck Freight, 1994-1999 .................................................................... 5 6 7.4. Dollar Value of Northbound Truck Freight, 1994-1999 ..................................................................... 5 7 7.5. Limitations of Southwestern U.S. Border Ports of Entry .................................................................... 6 0 vi
An Evaluation of Arizona's Competitiveness
Figures
Introduction 2.1. Map of U.S.-Mexico Border Region .......................................................................................... ........... 2 Growth in Trade to M�xico 4.1. Export Sales to Mexico, by State, 1993 and 1998 ............................................................................. 1 3 4.2. Percentage Change in Exports of Electric and Electronic Equipment, 1993-1998 .......................... 1 4 4.3. Electric and Electronic Equipment Sales to Mexico, 1993 and 1998 ............................................... 1 5 4.4. Percentage Change in Exports of Industrial Machinery and Computers, 1993-1998 ....................... 1 5 4.5. Industrial Machinery and Computer Sales to Mexico, 1993 and 1998 ............................................. 1 6 4.6. Percentage Change for Selected Export Categories, 1993-1998 ....................................................... 1 6 4.7. Percentage Share of Exports by Port, 1999 ................................................................................. ....... 2 5 Skilled Human Resources and Labor Pool Development 5.1. City Unemployment Rate Estimates, 1999 ......................................................................................... 2 8 5.2. County Unemployment Rate Estimates, 1999 ................................................................................... 2 8 5.3. Tijuana Maquiladora Employment, 1998 .......................................................................................... 3 2 5.4. College Educational Attainment Percentages by Region .................................................................. 3 3 Maquiladoras and Regional Supplier Development 6.1. Percentage of Maquiladoras by Industry Activity .............................................................................. 4 1 6.2. Percentage Share of Maquiladoras in Selected Mexican States, 2000 ............................................... 4 2 Advanced Transportation Infrastructure 7.1. Map of Proposed Naco Rail Port of Entry ........................................................................................... 5 1 7.2. Map of San Diego & Arizona Eastern Railway ................................................................................... 5 1 7.3. Total Passengers Enplaned and Deplaned, 1999 ................................................................................ 5 3 7.4. Total Air Freight and Mail Cargo, 1999 .............................................................................................. 5 3 7.5. Map of Canamex Corridor ................................................................................................................... 5 8 7.6. Map of Proposed California State Route 905 ..................................................................................... 5 9
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An Evaluation of Arizona's Competitiveness
Acknowledgements
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n Evaluation of Arizona's Competitiveness was possible due to the critical support and guidance of the Arizona-Mexico Commission. Their leadership, commitment and vision to facilitate the development of a truly integrated binational region were instrumental in the production of this report. In addition, a special thank you is extended to the Arizona-Mexico Commission's Executive Board, as well as Bruce Wright, Vera Parlakovich-Kochi, Marshall Worden, David de Kok, Scott Davis and Jason Ott of the Office of Economic Development, who served as part of an internal review committee. Each of these individuals gave precious time in order to provide vital feedback on this report.
A large number of key contacts in each of the communities graciously welcomed the author and shared insightful information on their regions. Although it is not possible to list everyone, several people went beyond the call of duty to provide not just data, but encouragement and support. They include Augustine Garcia, Bill Bourland, Jose Felipe Garcia, Amy Echols Starkey, Stephanie Lemme, Art Macias, Joel Viers, Lee Ann Ayers, C. Paige Webster, Nan Valerio, Angelika Villagrana, Judy Harper, Joyce Grossman, Mario Hernandez, Henry E. Sauvignet and J. Michael Patrick. June Murphy and Alicia Foley provided additional assistance in the form of technical and administrative skills. Kirsteen Anderson and Cindy Betka, CMI, editor and layout designer respectively, provided unwavering attention under difficult timelines and conditions in order to see this project to completion.
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An Evaluation of Arizona's Competitiveness
Introduction
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A high-quality education system (K-12 and university) A skilled and talented workforce Advanced transportation infrastructure Economic development strategies to enhance and link these resources
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f a community is to be competitive in attracting wealth and investment, leaders must understand the implications of global economic trends toward increasing integration and interdependence. Communities around the world are seeking models of the conditions needed to create and support a dynamic business environment. Key ingredients in the competitive mix appear to include:
An Evaluation of Arizona's Competitiveness (2000 edition) addresses these key assets to guide Arizona economic development professionals in designing effective marketing approaches for their communities. As a product of the Arizona-Sonora Project binational development strategy, the Evaluation seeks to assist communities in capturing a larger share of North American Free Trade Agreement (NAFTA), western hemispheric, and global trade.
Overview of the Evaluation
The 2000 An Evaluation of Arizona's Competitiveness provides a comparative analysis of key communities in Arizona (Phoenix, Tucson, Yuma, Nogales, and Douglas) relative to California (San Diego and Calexico) and Texas (San Antonio, El Paso, and Laredo; Figure 2.1). The 1999 Evaluation of Arizona Competitiveness identified several factors contributing to competitiveness, which are reviewed in the first section of this report. To avoid unnecessary duplication of the previous report, the 2000 Evaluation focuses on providing statistics and economic development information in five areas:
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Growth in Trade to Mexico Skilled Human Resources and Labor Pool Development Maquiladoras and Regional Supplier Development Advanced Transportation Infrastructure Initiatives and Strategies Underway to Enhance Trade with Mexico
An Evaluation of Arizona's Competitiveness
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Concluding observations, based on the findings from both 1999 and 2000 reports, on ways to enhance Arizona's competitive position relative to selected communities in other southwestern states, can be found at the end of this study. Like the 1999 report, the 2000 Evaluation serves as a marketing tool for increasing Arizona's interaction in competitive markets.
Research Methodology
A host of information was consulted for this project. Sources include: ! Economic development offices at the state and local levels ! Internet sites and web pages ! Statistical reports and publications and articles for both professional and general readership. During the report preparation process, trips were made to each community to conduct interviews with key economic developers. In addition, business leaders, government officials, and academic scholars were consulted. Every attempt was made to provide comprehensive coverage, however assessing and identifying competitive advantages is a complex task with significant inherent measurement limitations, particularly in comparisons between the large metropolitan areas and the small communities along the border with Mexico.
FIGURE 2.1: MAP OF U.S. MEXICO BORDER
Source: Red Horse Graphics 2
An Evaluation of Arizona's Competitiveness
Key Findings from the 1999 Evaluation of Arizona Competitiveness
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Availability of skilled human resources Availability of key technologies Availability of advanced transportation and communication infrastructures Availability of key natural resources A sufficient customer base to encourage efficiency and innovation by firms Ability to maintain a lead in specific clusters Existence of key suppliers providing specialized inputs Firm structures that encourage skilled labor force development Existence of firms large enough to stimulate growth of a local supplier base Existence of goals and strategies for enhancing NAFTA trade
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Factors Contributing to Competitiveness
variety of factors influence the degree of competitive advantage one area holds over another. In terms of NAFTA-related enterprise, these factors include:
Table 3.1 summarizes the advantages and challenges faced by each community.
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TABLE 3.1 Competitive Advantages and Challenges to Economic Development, by City City Advantages Arizona Phoenix Strategic economic planning process with Sonora; cluster development in aerospace, semiconductors/high technology; supplier base for these industries; industrial and business services hub for the state; good air transportation services; potential hub functions for proposed CANAMEX corridor; establishment of market niches in bioindustry, software, environmental technologies, and information technologies. Distance from Mexican border relative to other profiled cities; minimal targeting of NAFTArelated firms; the head start and aggressive marketing by other communities relative to attracting NAFTA-oriented firms. Challenges
Tucson
Industry clusters in aerospace, optics, and software, and highly skilled workforce in these areas; high-quality health centers; metal-fabrication facilities; sophisticated educational structure.
Distance from the industrial base in Mexico; insufficient air transportation services and lack of rail service; high cost of real estate and utilities; high tax levels for high-technology and capital-intensive industries; less skilled workforce in plastics than Texas.
Yuma
Binational development efforts by the Rio Colorado Commission; availability of water; avionics industry cluster and infrastructure, with skilled workforce; agribusiness cluster.
Unfavorable external perceptions of the community; insufficient development of border port-ofentry infrastructure; lack of knowledge about the characteristics and needs of NAFTA firms.
Nogales
Highway and rail access to western Mexico; experimental unified port design project; expertise in importation and distribution of Mexican-grown fresh produce.
High cost and limited availability of real estate; shortage of well-educated, English-proficient workers; limited cultural amenities; traffic congestion and safety issues due to rail line through town.
Douglas
Uncongested port of entry; inexpensive land prices; availability of land for development; proximity to Fort Huachuca air base and related surveillance expertise; proximity to educated workforce in nearby Bisbee.
Shortage of qualified and skilled workers; low student education scores; insufficient air, highway, and rail linkages; limited operating hours at border port of entry; lack of hightechnology communication services; limited cultural amenities.
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An Evaluation of Arizona's Competitiveness
TABLE 3.1 Competitive Advantages and Challenges to Economic Development, by City City Advantages California San Diego Maquiladora concentrations in electronics and television sets; communications infrastructure; industry clusters in biotechnology, telecommunications, and defense. Stagnating living standards; high cost of living, especially real estate; shortage of engineers; highway links to Mexico congested and operating over capacity; lack of good rail connections; less than optimal air transport services; inadequate channel depth in harbor for container ships; most supplies for Asian-owned maquiladoras purchased elsewhere. Challenges
Calexico
Proximity to Baja California's capital, Mexicali; inexpensive land, labor, water, and electric power; stable labor base, which poses an advantage over Tijuana.
Local resistance to development of trade linkages with Mexico and Asia; expansion of Calexico-East BPOE creating conflict with El Centro; local resistance to joint development of the area; many college graduates leave the area.
Texas San Antonio Construction of "hush house" to support air-cargo Heavy reliance on tourism and lack of cluster traffic to Mexico and South America; the concentradevelopment in manufacturing; lack of incentive tion of international business services in a new trade for trade to stop in the city when it is required to center (Consul General of Mexico, Trade Commission stop two hours south in Laredo. of Mexico, Attorney General of Mexico, NADBANK, and commercial offices of several Mexican states); Casas San Antonio and Inland Port San Antonio initiatives; high level of collaboration among economic development organizations; meetings between mayor and Mexican presidents; promotion and marketing of Medical Destination Program; large number of well-educated bilingual workers.
El Paso
Emerging industry clusters in plastics and metals; growing maquiladora supplier base; concentration of maquiladoras, particularly in electronics.
Chronic congestion at toll-free BPOE; shortage of water; shortage of real estate for manufacturing; poor air quality.
Laredo
Transportation/distribution cluster; transportation Insufficiently diversified economy (too depeninfrastructure and geographical location; international dent on transportation/distribution); highway banking expertise in NAFTA trade. congestion and lengthy crossing times at ports of entry; inconvenient distance and poor highway to Columbia BPOE.
Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
An Evaluation of Arizona's Competitiveness
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Summary of Findings Trade with MexicoState-Level Comparisons
The proportion of total export sales going to Mexico is highest for Texas (34 percent). For Arizona the proportion is 14 percent, and for California, 8 percent. When viewed in terms of growth in export sales, however, Arizona (80 percent) and California (94.3 percent) considerably outperform Texas (46.7 percent). Among the chief exports to Mexico from the three border states are electric and electronic equipment, industrial machinery and computers, chemical products, and rubber and plastic products. Primary metals, transportation equipment, and fabricated metals are also significant exports for Arizona. Texas stands out for growth in rubber and plastics, while California shows the highest growth in exports of paper products.
Survey Results
In survey responses from private firms in San Diego, El Paso, Laredo, Phoenix, Tucson, Yuma, Nogales, and Douglas the following site-selection factors were identified as important by the largest number of respondents (Table 3.2): TABLE 3.2 Leading Site-Selection Factors Important to Survey Respondents Arizona Responses (n = 30) Quality of life (n = 22) Real estate availability (n = 20) Real estate cost (n = 20) Workforce availability (n = 20) Highway infrastructure (n = 18) Workforce education/skill levels (n = 18) Right-to-work state (n = 18) Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999). California and Texas Responses (n = 24) Real estate availability (n = 18) Real estate cost (n = 18) Proximity to markets (n = 17) Quality of life (n = 17) Workforce availability (n = 16) Telecommunications service (n = 13)
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An Evaluation of Arizona's Competitiveness
The site selection factors most frequently cited as not important are listed in Table 3.3: TABLE 3.3 Leading Site-Selection Factors Most Often Judged Not Important Arizona Responses (n = 30) Rail transportation (n = 17) State job training programs (n = 16) Natural gas service (n = 15) Sea transportation (n = 14) Enterprise zones (n = 14) Natural gas cost (n = 13) California and Texas Responses (n = 24) Sea transportation (n = 14) Natural gas cost (n = 12) State job training programs (n = 12) Rail transportation (n = 11) Water cost (n = 11) Water service (n = 11) Natural gas service (n = 11) Enterprise zones (n = 11) Foreign trade zones (n = 11) Financing programs (n = 11) Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
The greatest number of respondents evaluated their existing locations as competitive in the categories listed in Table 3.4:
TABLE 3.4 Leading Factors Respondents Consider Competitive in Existing Location Arizona Responses (n = 30) Quality of life (n = 20) Real estate cost (n = 19) Highway infrastructure (n = 18) Real estate availability (n = 16) Right-to-work state (n = 16) Education skill level (n = 14) Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999). California and Texas Responses (n = 24) Workforce availability (n = 17) Proximity to markets (n = 17) Real estate availability (n = 13) Wages (n = 13) Quality of life (n = 12)
An Evaluation of Arizona's Competitiveness
7
Table 3.5 lists the categories in which respondents evaluated their existing locations as not being competitive. TABLE 3.5 Leading Community Location Factors Rated as Not Competitive Arizona Responses (n = 30) Sea transportation (n = 17) Property tax (n = 9) Electricity costs (n = 9) State job training (n = 9) Financing programs (n = 9) California and Texas Responses (n = 24) Sea transportation (n = 11) Property tax (n = 11) Electricity costs (n = 11) Water costs (n = 10) Water service (n = 9) State job training (n = 9) Time and cost of permitting process (n = 9) Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
Table 3.6 shows the order in which respondents ranked the seven communities studied in terms of NAFTA-related competitiveness: TABLE 3.6 Evaluation of NAFTA-Related Competitiveness Rank 1 2 3 4 5 6 7 Arizona Ratings Tucson, AZ Nogales, AZ El Paso, TX San Diego, CA Yuma, AZ, and Laredo, TX Phoenix, AZ Douglas, AZ Rank 1 2 3 4 5 6 California and Texas Ratings San Diego, CA El Paso, TX Nogales, AZ, and Laredo, TX Tucson, AZ Yuma, AZ, and Douglas, AZ Phoenix, AZ
Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
8
An Evaluation of Arizona's Competitiveness
Where Arizona Could Capture a Larger Share of NAFTA Trade
Based on research done for this evaluation and for other projects aimed at enhancing Arizona's economy and increasing the state's economic interactions with Mexico, Arizona has the potential to increase its share of trade with Mexico and Latin America in a number of key areas, namely:
l l l l l l l l
High-technology activities, including semiconductor-based production operations Metal fabrication operations Medical devices, pharmaceuticals, and biotechnology Plastics Advanced border transportation technologies Air transport Warehousing and distribution Surveillance technologies
Targeted Growth Areas
As Table 3.7 indicates, each of the communities in this analysis has identified key areas of strength as well as specific targets for economic development. In each case, the choices are based on evaluation of that community's existing or potential ability to maintain a lead in that sector. TABLE 3.7 Economic Development Targets, by City City Key/Targeted Industries Arizona Phoenix Aerospace, high technology, bioindustry, business services, environmental technology, food/fiber/ natural products, information processing, manufacturing, software, transportation and distribution Aerospace, bioindustry, electric and electronic components, environmental technologies, instrumentation, metal fabrication, optics, software development, telecommunications Aerospace, agribusiness, electronics, high technology, light manufacturing, plastics, sheet metal stamping, telecommunications, tourism, senior living International trade, manufacturing/maquiladora, services, tourism Aerospace/high technology, computers, light industrial, manufacturing/maquiladora, professional services, telecommunication, tourism California San Diego Bioscience, communications, defense, electronics, manufacturing/maquiladoras, recreational goods, software, tourism Agribusiness, manufacturing suppliers
Tucson
Yuma
Nogales Douglas
Calexico
An Evaluation of Arizona's Competitiveness
9
Texas San Antonio International business services, manufacturing, health-care industry, communications, corporate and regional offices, tourism Advanced technical, back office, computer-related, headquarters, medical, motor vehicle production, retirement, resorts, tool and die manufacturing Manufacturing/maquiladora, services, transportation and distribution
El Paso
Laredo
Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
Goals and Strategies Oriented toward Trade with Mexico and Latin America
All the communities included in this analysis engage in economic development activities targeted specifically at Mexican and Latin American markets. Table 3.8 summarizes each community's activities. TABLE 3.8 Key NAFTA-Oriented Economic Development Activities and Strategies, by City City Activities and Strategies Arizona Phoenix Headquarters for statewide Binational Economic Development Commission; MatchMex97 binational industry partnering event; NAFTA (FEDEX) Conference; Environmental Technology Cluster grant focusing on developing business with Mexico; CANAMEX corridor; Strategic Economic Development Vision for the Arizona-Sonora Region ("The Arizona-Sonora Project"), which has a six-point plan that includes the development of binational clusters in the areas of health services, manufacturing, tourism, and agribusiness; a comprehensive workforce development strategy; increased efficiency in transportation and border crossing; and regulatory reforms to spur investment, and market promotionof the region. Maquiladora supplier development; Tucson-Mexico: Closer Than Ever--Mas Cerca que Nunca! project to facilitate business partnerships between Tucson and northwestern Mexico; Tucson-Sonora collaborative referral program; Mexico Seminar Series; CANAMEX corridor; Strategic Economic Development Vision for the Arizona-Sonora Region (see Phoenix for description). Binational Economic Development Commission; joint border strategic plan; maquiladora advertising campaign; directory of investors; international trade show; CANAMEX Corridor; Strategic Economic Development Vision for the Arizona-Sonora Region (see Phoenix for description); Arizona-Mexico Commission--Border Trade Alliance Border Strategic Partnership. Maquiladora supplier development; investment guide and interactive CD-ROM to market binational attributes; CANAMEX corridor; Strategic Economic Development Vision for the Arizona-Sonora Region (see Phoenix for description); Arizona-Mexico Commission--Border Trade Alliance Border Strategic Partnership. Maquiladora supplier development; investment guide to market binational attributes; binational marketing efforts involving economic development officials in Douglas and Agua Prieta; facilitation of dialogue between region's mayors; SEAGO's International Trade Center; Strategic Economic Development Vision for the Arizona-Sonora Region (see Phoenix for description); Arizona-Mexico Commission--Border Trade Alliance Border Strategic Partnership; border region business incubator; South Eastern Arizona Center for Agribusiness Development.
Tucson
Yuma
Nogales
Douglas
10
An Evaluation of Arizona's Competitiveness
California San Diego Maquiladora supplier development; binational meetings of economic developers; binational communication network project; Golden Opportunities Program for small and mid-sized exporters; binational tourism marketing; NAFTA conferences; public/private intermodal transportation efforts; Cross-Border Connect Program. Binational collaboration on NAFTA conference; agribusiness trade show. Texas San Antonio Inland Port San Antonio concept, which includes the redevelopment of Kelly AFB and the designation of San Antonio as a NATAP pilot project; trade missions by the Free Trade Alliance and Casas San Antonio to Chile and Argentina promoting two-way trade and investment; Transporte Interna tional conference on trade and transportation issues; collaboration with customs administrators from Columbia Solidarity Bridge (Laredo) in an effort to promote the Inland Port project; monthly Mexico group meetings; promotion of 1999 Joint Business Conference. Maquiladora supplier development; binational industrial promotion and relocation guide; binational meeting of economic developers. Vision '97 International Trade Show; InfoCenter in Monterrey jointly operated with Corpus Christi.
Calexico
El Paso
Laredo
Source: Evaluation of Arizona Competitiveness (Tucson: The University of Arizona Office of Economic Development, 1999).
Important Assets Arizona Should Market to Prospective Firms
Arizona has many assets and attributes that make it a particularly attractive location for firms seeking a platform for NAFTA-related enterprise. Among these qualities are:
l l l
Arizona's long history of cordial relations with Sonora Activities of the Arizona-Mexico Commission/Comisi�n Arizona-Mexico in transboundary business development Strategic Economic Development Vision for the Arizona-Sonora Region ("Arizona-Sonora Project"), a unique long-range strategic planning process guided by several goals: w Developing the two states into a single economic region w Establishing Arizona-Sonora as a major hub on the NAFTA trade corridor w Eliminating trade barriers w Stimulating commercial development in several key industry sectors w Creating new markets for regional products and services
l
Expansion of the Arizona-Sonora Project to include a six-point plan to (1) establish binational industry clusters (agribusiness, health services, manufacturing, and tourism); (2) implement a comprehensive workforce development and education strategy for the region; (3) implement efforts to increase efficiency in transportation and border crossings; (4) market the region for business development and attraction; (5) undertake regulatory reforms to encourage capital investment; and (6) integrate sustainable development and community-based development into the regional plan
An Evaluation of Arizona's Competitiveness
11
l l
Expertise and experience in aerospace and avionics, and the presence of a supplier base for these sectors Expertise and considerable concentration of semiconductor and other high-technology firms, particularly in the greater Phoenix area Bioindustry expertise and activity (medical devices, biotechnology, pharmaceuticals) The formation of the Plastics and Advanced Materials Cluster offers important supplier linkages for the growing maquiladora industry in Mexico An extensive and diversified higher-education structure With the inclusion of Sonora, the existence of a large engineering workforce Explicit and active support at the state and local levels for formation and maintenance of industry clusters and formal industry cluster organizations in the sectors identified by the governor's task force as having strong potential for further growth and development Quality-of-life factors, including golf courses and conference facilities, abundant outdoor recreational opportunities, major-league sports teams (only San Diego is competitive with Phoenix in this regard), a wide array of superior programs in the higher-education realm, a lower cost of living than San Diego, and proximity to and accessibility of major metropolitan areas in California
l l
l l l
l
Su m m a r y Observations
l
Arizona is in a good position to capture a larger share of NAFTA trade, if sharply focused marketing and recruitment strategies are implemented at the state and local levels. All the communities in this study are just beginning to generate supplier linkages to the maquiladoras; therefore an important window of opportunity exists for Arizona to move aggressively into this area of marketing. Arizona should recruit more plastics manufacturers to the state, given the wide uses of these materials in production operations, particularly in the medical device and electronics sectors. Arizona should place greater emphasis on generating NAFTA trade linked to the state's aerospace, avionics, and semiconductor strengths. Formalization of the CANAMEX corridor, a project to create a direct link between Canada and western Mexico, holds potential for placing Arizona at a crucial crossroads of NAFTA trade in the western reaches of Mexico, the United States, and Canada. It is also possible that, with appropriate business and transportation infrastructure development in the Yuma area, Arizona might capture trade from California. Given privatization activities in Mexico, Arizona must monitor developments closely and be positioned to move quickly into new areas of opportunity, such as the transportation sector. Strong consideration should be given to reducing the burden on small and medium-sized businesses wishing to qualify their products for duty-free NAFTA status. Arizona has many modest-sized firms with products that are highly competitive in Mexico; the marketing efforts of these firms need to be supported, at least in the short term; for example, through providing NAFTA training.
l
l
l
l
l
12
An Evaluation of Arizona's Competitiveness
Growth in Trade to Mexico
Growth in Export Sales to Mexico
Figure 4.1: EXPORT SALES TO MEXICO BY STATE, 1993 and 1998 ($ in thousands)
25,000,000
21,626,583
D
uring the 1993-1998 period, Texas exceeded the export sales of both Arizona and California (see table 4.1). On the other hand, Arizona (83.3 percent) and California (111 percent) experienced greater increases in their trade relations with Mexico than did Texas (68.2).
20,000,000
120
111
Arizona California Texas
15,000,000
12,860,799 10,798,216
100
83
80 60
10,000,000
5,116,637 1,993,101 1,087,418
68
5,000,000
40 20 0
0 1993 Export Sales to Mexico 1998 Export Sales to Mexico
Percent Change 1993-1998
Source: U.S. Census Bureau, Exporter Location Series (June 1999)
Changes in Major Export Categories
Electric and electronic equipment and industrial machinery and computers continue to be the leading categories of merchandise exported to Mexico from Arizona, California, and Texas (Table 4.2). Notable differences begin to emerge in the third, fourth, and fifth rankings. For instance, rubber and plastic products is ranked third for Arizona and fifth for Texas, but does not appear in the top five exports for California. Transportation equipment is ranked third among California's exports to Mexico and is ranked fourth for Texas. Arizona is distinguished by high levels of exports in primary metals and paper products, California exports large amounts of fabricated metal products and apparel, and Texas is strong in chemical products.
An Evaluation of Arizona's Competitiveness
13
TABLE 4.1: TOP FIVE MERCHANDISE EXPORTS SALES TO MEXICO, BY INDUSTRY SECTOR, 1998 Rank Arizona Manufactures 1 2 3 4 5 Electric & Electronic Equipment California Manufactures Electric & Electronic Equipment Texas Manufactures Electric & Electronic Equipment
Industrial Machinery & Computers Industrial Machinery & Computers Industrial Machinery & Computers Rubber & Plastic Products Primary Metals Paper Products Transportation Equipment Fabricated Metal Products Apparel Chemical Products Transportation Equipment Rubber & Plastic Products
Source: U.S. Census Bureau, Exporter Location Series (May 1999).
Electric and Electronic Equipment
Electric and electronic equipment sales to Mexico increased considerably for Arizona (130 percent) and California (202.7 percent) between 1993 and 1998 (Figure 4.1 and table 4.3). Although Texas experienced more modest growth (86.7 percent) during this period, it continues to lead in terms of dollar value of exports relative to the other border states. During 1997 and 1998 Arizona experienced a 4.2 percent decrease in export sales, compared to 9.8 percent and 8 percent growth for California and Texas respectively. FIGURE 4.2: PERCENTAGE CHANGE IN EXPORTS OF ELECTRIC AND ELECTRONIC EQUIPMENT, 1993-1998
250 202
200
150 130 100 86
50
0 Arizona California Texas
Sour ce: U.S. Census Bureau, Exporter Location S eries (May 1999)
14
An Evaluation of Arizona's Competitiveness
FIRGURE 4.3: ELECTRIC AND ELECTRONIC EQUIPMENT SALES TO MEXICO 1993 AND 1998
5,000,000
4,869,618
4,500,000 4,000,000 3,500,000 3,000,000
2,607,972 3,710,506
2,500,000 2,000,000 1,500,000 1,000,000
603,643 1,224,618
500,000 0
262,456
Texas California Arizona
Texas California Arizona
1993
1998
Source: U.S. Census Bureau, Explorter Location Series (May 1999)
Industrial Machinery and Computers
In the industrial machinery and computers sector, California experienced the greatest increase in export sales to Mexico from 1993 to 1998 (102.3 percent), followed by Texas (60.1 percent) and Arizona (36.2 percent). (Figure 4.2 and table 4.4.) Indeed, the data for 1997 and 1998 indicate that Arizona saw a -10.5 percent decrease in this sector, relative to growth in Texas (29 percent) and California (6.3 percent). FIGURE 4.4: PERCENTAGE CHANGE IN EXPORTS OF INDUSTRIAL MACHINERY AND COMPUTERS, 1993-1998
120
102
100
80
60
60
36
40
20
0 Arizona California Texas
Source: U.S. Census Bureau, Exporter Location Series (May 1999)
An Evaluation of Arizona's Competitiveness
15
FIGURE 4.5: INDUSTRIAL MACHINERY AND COMPUTER SALES TO MEXICO, 1993 AND 1998
2,500,000
2,409,383
2,000,000
1,542,216
1,500,000
1,505,230
1,000,000
762,250
500,000
312,074 229,153
0
Texas California Arizona Texas California Arizona
1993
1998
Source: U.S. Census Bureau, Exporter Location Series (May 1999)
Change in Selected Export Categories
During the 1993 to 1998 period, Arizona continued to experience considerable growth in export sales of primary metals (296.8 percent) and fabricated metals (115.4 percent). California saw a notable increase of 115.6 percent in trade of chemical products, compared to 72.1 percent and 64.1 percent growth in Texas and Arizona, respectively. In addition, California stood out for growth in paper product sales (112.9 percent), followed by Arizona (97.3 percent) and Texas (33.7 percent). California's increase in transportation exports (116.9 percent) during this period is surprising given the decrease experienced by Texas (-2.4 percent) and the modest growth registered by Arizona (22.9 percent). Arizona's modest growth in transportation exports is accounted for in part by a drastic -45.4 percent decrease in sales from 1997 to 1998, reversing a growth trend in the previous years. Texas led the other states in rubber and plastic product exports, with an increase of 226 percent during the 1993 to 1998 period (Figure 4.3 and table 4.5). FIGURE 4.6: PERCENTAGE CHANGE FOR SELECTED EXPORT CATEGORIES, 1993-1998
300 250
226 296
Rubber and Plastic Primary Metal Chemical Products Paper Products Fabricated Metal Transportation Equipment
96 72 58 22 33
200
162
150
115 115 112 79 64 116 101
144 97
100 50 0
-2
-50 Arizona California Texas
Source: U.S. Census Bureau, Exporter Location Series, (May 1999)
16
An Evaluation of Arizona's Competitiveness
TABLE 4.2: CHANGE IN DOLLAR VALUE OF SELECTED EXPORT CATEGORIES, 1993-1998 Arizona 1993 1998 Rubber & Plastic Products Primary Metals Chemical Products Paper Products Fabricated Metal Products Transportation Equipment $69,967 $36,852 $25,467 $68,451 $58,483 $33,122 $183,786 $146,237 $41,791 $135,060 $125,984 $40,699 California 1993 1998 $243,672 $227,940 $228,946 $168.060 $269,417 $252,528 $437,636 $362,158 Texas 1993 1998 $444,786 $1,449,867 $559,290 $1,366,603
$493,683 $1,092,040 $1,879,096 $357,829 $541,723 $570,684 $422,231 $762,831 $827,676
$547,823 $1,562,255 $1,524,439
Source: U.S. Census Bureau, Exporter Location Series (May 1999).
Exports by Metro Area
All the major metropolitan areas included in this report (Phoenix and Tucson, Arizona; San Diego, California; and San Antonio, El Paso, and Laredo, Texas) experienced various degrees of growth in total international exports, as table 4.6 indicates. In terms of export-related dollar gains for all U.S. metro areas (listed by growth in merchandise value), San Diego led the other communities for the 1993-1998 period. San Diego's top ranking underscores a downward shift for the Phoenix-Mesa area, which had dominated among the communities until 1997. Whereas Phoenix experienced a sudden reversal after 1997, Laredo showed a steady, significant decrease. TABLE 4.3: CHANGE IN EXPORT VALUE BY METRO AREA, 1993-1998 Rank 8 11 12 42 52 250 Metro Area San Diego, California Phoenix-Mesa, Arizona El Paso, Texas San Antonio, Texas Tucson, Arizona Laredo, Texas Change in Export Value $4,233,876 3,603,814 3,577,535 1,076,905 766,297 -428,253
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
For the 1997 to 1998 period alone, San Diego's performance in export-related dollar gains again exceeds that of El Paso, San Antonio, Tucson, Laredo, and Phoenix-Mesa (Table 4.7). Indeed the dramatic $3 million decrease for Phoenix-Mesa during this one-year period explains its fall to a ranking behind San Diego for total dollar gains during 1993-1998.
An Evaluation of Arizona's Competitiveness
17
TABLE 4.4: CHANGE IN EXPORT VALUE BY METRO AREA, 1997-1998 Rank 5 6 15 21 234 253 Metro Area San Diego, California El Paso, Texas San Antonio, Texas Tucson, Arizona Laredo, Texas Phoenix-Mesa, Arizona Growth in Export Value $781,622 710,633 298,011 192,894 -325,540 -3,005,635
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
The rankings for U.S. metro-area exporters in 1998 (listed by dollar value) show San Diego leading Phoenix-Mesa, El Paso, and Laredo (see table 4.8). San Antonio and Tucson rank far behind these communities. Comparing the dollar values for 1997 and 1998, Phoenix stands out for its dramatic loss of position. In 1997, Phoenix was rated the 10th largest metro-area exporter, ahead of San Diego; by 1998, it had dropped to 17th place.
TABLE 4.5: TOP METRO-AREA EXPORTERS, 1997 AND 1998 Rank 12 17 21 37 70 85 Metro Area San Diego, California Phoenix-Mesa, Arizona El Paso, Texas Laredo, Texas San Antonio, Texas Tucson, Arizona Total Exports, 1997 $7,810,003 11,108,393 5,833,929 3,959,112 1,342,822 1,060,526 Total Exports, 1998 $8,591,625 8,102,758 6,544,562 3,633,572 1,640,833 1,253,420
Source: U.S. Census Bureau, Exporter Location Series (November 1999). In terms of percentage change in dollar value of exports between 1993 and 1998, San Antonio, Tucson, El Paso, and San Diego all experienced greater growth than the national average (Table 4.9). Phoenix and Laredo failed to meet the average nationwide for both 1993 to 1998 and 1997 to 1998. Phoenix's decline of -8.2 percent during 1997-1998 is a substantial reversal from the 40.4 percent increase it experienced during 1996-1997.
18
An Evaluation of Arizona's Competitiveness
TABLE 4.6: PERCENTAGE CHANGE IN DOLLAR VALUE OF EXPORTS 1993-1998 AND 1997-1998 Metro Area San Antonio, Texas Tucson, Arizona El Paso, Texas San Diego, California Phoenix-Mesa, Arizona Laredo, Texas U.S. national average 1993-1998 191.0 157.3 120.6 97.2 80.1 -10.5 89.8 1997-1998 22.2 18.2 12.2 10.0 -8.2 -27.1 10.7
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
To summarize the trends in trade:
l
In terms of greatest dollar gain for 1993-1998 and 1997-1998, the San Diego metro region leads the other communities; in contrast, the Phoenix-Mesa metro region experienced a dramatic reversal during both time periods. Tucson's ranking of 85th in total exports for 1998 continued to place it far behind San Diego (12th), Phoenix-Mesa (17th), El Paso (21st), Laredo (37th), and San Antonio (70th). On the other hand, among the studied cities, Tucson's rate of growth (157.3 percent for 1993-1998 and 18.2 percent for 1997-1998) was the second fastest behind only San Antonio.
l
Exports to NAFTA Countries, 1993-1998 and 1997-1998
As table 4.10 shows, during the 1993 to 1998 period, Tucson's 124.6 percent growth in export sales to NAFTA markets trailed behind only San Antonio (273.8 percent). In fact all the communities except Phoenix-Mesa and Laredo experienced triple-digit growth between 1993 and 1998, and Laredo was the only community to register a decline (-11.3 percent) for this period. Phoenix-Mesa and Laredo continued to stand out relative to the other communities for percentage decreases (-6.8 and -9.2 percent respectively) between 1997 and 1998. San Antonio (27.9 percent) led the communities during 1997 and 1998, followed by San Diego (13.8 percent), El Paso (11.3 percent), and Tucson (4.4 percent). In terms of trade with Mexico specifically, San Antonio experienced tremendous growth, with a 329.5 percent increase during 1993-1998, followed by El Paso (114.1 percent), Tucson (109.7 percent), and San Diego (105.4 percent). In contrast, Phoenix experienced more modest growth (74.2 percent) and Laredo brought up the rear with a -14.9 percent decrease (Table 4.10). The same general ranking holds true for 1997-1998. San Antonio led the group with a 29.6 percent increase. Notable trends during this period are that San Diego (11.4 percent) experienced greater growth than Tucson (2.2 percent), and Phoenix-Mesa (-13.4 percent) shared the distinction of negative change with Laredo (-6.5 percent).
An Evaluation of Arizona's Competitiveness
19
TABLE 4.7: PERCENTAGE CHANGE IN MERCHANDISE EXPORTS TO NAFTA COUNTRIES AND MEXICO, 1993-1998 AND 1997-1998). Metro Area San Antonio, Texas Tucson, Arizona El Paso, Texas San Diego, California Phoenix-Mesa, Arizona Laredo, Texas NAFTA Countries 1993-1998 1997-1998 273.8 124.6 121.0 114.3 93.2 -11.3 27.9 4.4 11.3 13.8 -6.8 -9.2 Mexico 1993-1998 1997-1998 329.5 109.7 114.1 105.4 74.2 -14.9 29.6 2.2 13.3 11.4 -13.8 -6.5
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Major Export Categories, by City
The rankings in Table 4.11 indicate the relative importance of various export categories for the Phoenix-Mesa, San Diego, El Paso, and Laredo areas. Data are not available for San Antonio and Tucson. The data reveal the following major points about world exports: Electric and electronic equipment is the most significant export for Phoenix-Mesa, San Diego, and El Paso, and the second most significant export for Laredo. Transportation equipment continues to lead Laredo's exports and is the number-three export for the Phoenix-Mesa metro region. Between 1997 and 1998, this sector moved up to fourth in importance for San Diego; it is not among the top ten exports for El Paso. Industrial machinery and computers ranks second for Phoenix-Mesa and San Diego exports, and third for Laredo. The sixth place ranking for El Paso represents an improvement from seventh place in 1997. Rubber and plastic products rank second for El Paso, seventh for both San Diego and Laredo, and ninth for PhoenixMesa. Apparel, the third most important export for El Paso, does not appear among the top ten export sectors for any of the other three metro areas. Scientific and measuring instruments ranks third among San Diego exports, fourth for Phoenix-Mesa, and tenth for both El Paso and Laredo. Primary metals ranks fourth among exports for El Paso, sixth for Laredo, eighth for Phoenix-Mesa, and tenth for San Diego. Chemical products ranks fourth for Laredo, sixth and seventh for San Diego and Phoenix-Mesa respectively, and does not appear among the top ten exports for El Paso. Paper products ranks eighth for both El Paso and Laredo and ninth for San Diego; it does not appear in the top ten exports for Phoenix-Mesa. Fabricated metal products, which was not among the top ten exports for Phoenix-Mesa in 1997, now ranks sixth for that metro region, followed by El Paso (7th) and San Diego (8th). Interestingly, in 1996 this was the third most important export category for Laredo, but it has not shown up in the top ten exports since then. 20
An Evaluation of Arizona's Competitiveness
TABLE 4.8: MERCHANDISE EXPORT SALES BY INDUSTRY SECTOR, 1998 Rank 1 Phoenix-Mesa Electric & Electronic Equipment Industrial Machinery & Computers Transportation Equipment Scientific & Measuring Instruments Non-Manufactured Products Fabricated Metal Products Chemical Products San Diego Electric & Electronic Equipment Industrial Machinery & Computers Scientific & Measuring Instruments Transportation Equipment Miscellaneous Manufactures Chemical Products El Paso Electric & Electronic Equipment Rubber & Plastic Products Apparel Laredo Transportation Equipment
2
Electric & Electronic Equipment Industrial Machinery & Computers Chemical Products
3
4
Primary Metals
5
Textile Mill Products
Food Products
6
Industrial Machinery & Computers Fabricated Metal Products Paper Products
Primary Metals
7
Rubber & Plastic Products Fabricated Metal Products Paper Products
Rubber & Plastic Products Paper Products
8
Primary Metals
9
Rubber & Plastic Products Refined Petroleum
Furniture & Fixtures
Non-Manufactured Products
10
Primary Metals Products
Scientific & Measuring Scientific & Measuring Instruments Instruments
Source: U.S. Census Bureau, Exporter Location Series (November 1999). Selected sectors were identified for more detailed analysis either because they appear among the leading exports of more than one state or because they have been targeted for cluster or industry development. Information on these sectors follows.
Electric and Electronic Equipment
Change in exports of electric and electronic equipment is displayed in table 4.12. From 1993 to 1998, San Diego's activity in the electric and electronic equipment sector grew at twice the rate of El Paso (193.9 percent to 94.6 percent), at triple the rate of Phoenix-Mesa (53.6 percent), and at seven times the rate of Laredo (25.4 percent). San Diego continued to lead in 1997-1998, with more modest growth for El Paso and dramatic decreases for both Phoenix-Mesa (51.3 percent) and Laredo (-37.5 percent).
An Evaluation of Arizona's Competitiveness
21
TABLE 4.9: PERCENTAGE CHANGE IN ELECTRIC AND ELECTRONIC EQUIPMENT EXPORTS, 1993-1998 AND 1997-1998 Metro Area San Diego, California El Paso, Texas Phoenix-Mesa, Arizona Laredo, Texas 1993-1998 193.9 94.6 53.6 25.4 1997-1998 7.2 0.3 -51.3 -37.5
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Industrial Machinery and Computers
The Phoenix-Mesa region experienced a significant increase (199.4 percent) in industrial machinery and computer exports during the 1993-1998 period, which was tempered by a considerable, decrease (-76.0 percent) during 19971998. Both El Paso and San Diego showed relatively strong growth during this time. Laredo stands out for a -12.9 percent decrease between 1993 and 1998, which masked a near reversal (a 10.2 percent increase) during 1997-1998 (Table 4.13). TABLE 4.10: PERCENTAGE CHANGE IN INDUSTRIAL MACHINERY AND COMPUTERS EXPORTS, 1993-1998 AND 1997-1998 Metro Area Phoenix-Mesa, Arizona El Paso, Texas San Diego, California Laredo, Texas 1993-1998 199.4 93.7 76.2 -12.9 1997-1998 -76.0 34.4 15.8 10.2
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Scientific and Measuring Instruments
El Paso's total exports of scientific and measuring instruments for 1993-1998 grew by 213.1 percent, whereas PhoenixMesa registered a much more modest 36.5 percent growth and San Diego just 28.9 percent growth (Table 4.14). Laredo, at -22.7 percent, saw a significant decline in this sector over the same period. El Paso, San Diego, and Laredo experienced very modest increases in 1997-1998, whereas the Phoenix-Mesa area registered a decline (-9.9 percent). TABLE 4.11: PERCENTAGE CHANGE IN SCIENTIFIC AND MEASURING INSTRUMENT EXPORTS, 1993-1998 AND 1997-1998 Metro Area Phoenix-Mesa, Arizona El Paso, Texas San Diego, California Laredo, Texas 1993-1998 213.1 36.5 28.9 -22.7 1997-1998 9.9 -9.9 5.6 2.72
Source: U.S. Census Bureau, Exporter Location Series (November 1999). 22
An Evaluation of Arizona's Competitiveness
Rubber and Plastic Products
In the rubber and plastic products sector, El Paso experienced more than four times the growth of Phoenix-Mesa, nearly eight times the growth of San Diego, and 19 times that of Laredo (Table 4.15). During 1997-1998, both El Paso and Phoenix continued to experience positive growth, in contrast to declines registered in San Diego (-21.3 percent) and Laredo (-2.4 percent). TABLE 4.12: PERCENTAGE CHANGE IN RUBBER AND PLASTIC EXPORTS, 19931998 AND 1997-1998 Metro Area Phoenix-Mesa, Arizona El Paso, Texas San Diego, California Laredo, Texas 1993-1998 543.6 116.3 68.9 28.2 1997-1998 20.2 18.9 -21.3 -2.4
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Fabricated Metal Products
Triple-digit growth occurred in exports of fabricated metals from the El Paso (362.6 percent) and Phoenix-Mesa (252.1 percent) areas, and San Diego (41.4 percent) experienced a modest increase as well. Laredo was the only community to see a decrease during 1993-1998, but this trend reversed in 1997-1998. El Paso experienced the greatest increase (31.2 percent) during 1997-1998, followed by Phoenix-Mesa (25.5 percent). San Diego and Laredo were nearly identical in their growth for this period with 18.3 percent and 18.2 percent respectively (Table 4.16). TABLE 4.13: PERCENTAGE CHANGE IN FABRICATED METAL EXPORTS, 19931998 AND 1997-1998 Metro Area Phoenix-Mesa, Arizona El Paso, Texas San Diego, California Laredo, Texas 1993-1998 362.6 252.1 41.4 -37.3 1997-1998 31.2 25.5 18.3 18.2
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Primary Metals
El Paso led the group in primary metal exports for 1993-1998 at 206.1 percent, followed by San Diego (59.1 percent) and Laredo (35.9 percent). The decline experienced by the Phoenix-Mesa metro area persisted in 1997-1998. Despite dramatic growth over the long term, San Diego was the only other community whose exports declined in 1997-1998, with a -4.6 percent drop.
An Evaluation of Arizona's Competitiveness
23
TABLE 4.14: PERCENTAGE CHANGE IN PRIMARY METAL EXPORTS, 1993-1998 AND 1997-1998 Metro Area Phoenix-Mesa, Arizona El Paso, Texas San Diego, California Laredo, Texas 1993-1998 206.1 59.1 35.9 -55.6 1997-1998 11.3 -4.6 14.8 -37.9
Source: U.S. Census Bureau, Exporter Location Series (November 1999).
Export Trade Activity of Selected Southwestern Ports
Because the U.S. Census Bureau data compiled in the Exporter Location Series provides information only on the largest metropolitan areas, U.S. Customs data were used to explore market potentials for the smaller communities of Douglas, Nogales, Yuma, and Calexico. This analysis has been expanded to include San Ysidro and Tecate (important ports of entry for San Diego) and Naco, which is located west of Douglas, Arizona. Data on total export trade for 1999 by select ports along the U.S.-Mexico border provides information on each port's percentage share and relative ranking (see figure 4.4 and table 4.18). Data for 1999 compiled by the Border Trade Institute at Texas A&M International University indicate similar patterns of export behavior with Mexico. (The top ten exports and imports of relevant border cities, by SITC code, can be found in the appendix.) In terms of trade with Mexico specifically, the following patterns hold true:
l
Motor vehicles for the transport of persons (SITC 78120) was the leading export for the Nogales and Laredo ports, the third leading export for San Diego, and the eighth for Tucson. Television receivers, color, including video monitors and projectors (SITC 76110) was the most important export for San Luis and El Paso and fourth for San Ysidro. Refined copper wire (SITC 68241) was the second leading export for both the Douglas and Naco ports. Gold including gold plated with platinum (SITC 97101) was third for Tucson and fifth for Tecate. Trousers, bib and brace overalls, breeches and shorts, for women or girls (SITC 84260) was ranked third among export categories for San Luis, sixth for the ports of Laredo and Otay Mesa, eighth for El Paso, and ninth for Douglas. The fourth-ranked commodities for both Tucson and Phoenix were parts of airplanes or helicopters (SITC 79295). This category did not show up in the ten leading exports of any of the other communities. Transmission apparatus for radiotelephony, radiotelegraphy, radio broadcasting, or television (SITC 76431) were the fourth most important exports for Nogales and El Paso, and was the seventh for Phoenix. Naco's fourth leading export, electric plugs and sockets not exceeding 1,000 volts (SITC 77258), was the seventh most important for Nogales. Special transactions and commodities not classified (SITC 93100) was ranked second for Tucson and Phoenix, and was relatively less important for other communities: El Paso (third), Douglas (fourth), San Luis (fifth), Naco (sixth), and Nogales and Laredo (both eighth). The only Californian port for which this export category shows up was San Ysidro (sixth).
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An Evaluation of Arizona's Competitiveness
FIGURE 4.7: PERCENTAGE SHARE BY PORTS
Other ports
Naco Tucson Douglas San Luis Tecate San Diego Phoenix San Ysidro Calexico East
Laredo
Nogales
Otay Mesa El Paso
Source: Border Trade Institute, Texas A&M International University (April 2000)
TABLE 4.15: EXPORT TRADE BY LEADING SOUTHWEST PORTS, 1999 Community Laredo, Texas El Paso, Texas Otay Mesa, California Nogales, Arizona Calexico East, California San Ysidro, California Phoenix, Arizona San Diego, California Tecate, California San Luis, Arizona Douglas, Arizona Tucson, Arizona Naco, Arizona Total for Southwestern Ports, 1999 Ranking by Percentage Share 1 2 4 6 8 10 11 12 13 14 15 16 21 -- Dollar Value of Trade $29,864,822,746 12,994,315,229 5,087,992,213 4,159,634,964 3,436,529,239 1,200,392,282 568,125,667 558,023,639 469,157,430 368,657,760 297,029,679 148,556,876 77,824,987 $74,913,401,554
Source: Border Trade Institute, Texas A&M International University (April 2000).
An Evaluation of Arizona's Competitiveness
25
A review of 1998 export data reflects the presence of only four of the leading commodities for 1999.
l
Parts of automatic processing machines and units thereof, magnetic or optical readers and machines for transcribing and processing data (SITC 75997) was for 1999 the third-ranked category for Douglas, followed by El Paso (fifth), and Laredo and Otay Mesa (both sixth). In 1998, this commodity was the third leading export for Phoenix, ninth for Laredo, and did not even rank among the top ten for El Paso and Laredo. Articles of iron or steel (SITC 69969) was the third-ranked category for Douglas and the ninth for El Paso in 1998. A year later it completely dropped off the top ten export lists for any Arizona or Texas port. It does appear as the second leading export for San Ysidro, the third for Calexico, and the eighth for Otay Mesa, all ports in California. Between 1998 and 1999, nondigital monolithic integrated units (SITC 77643) went from being the fourth most important export for Phoenix to the tenth. This category was the most important export for Calexico in 1998; however, current data indicate that it is no longer in the top ten for Calexico and instead has emerged in tenth place for Otay Mesa. Ranked third and sixth respectively for the ports of Yuma and Nogales in 1998, exports of cartons, boxes, and cases of corrugated paper or paperboard (SITC 64211) appear to have shifted to ports in California by 1999. Most recent figures rank this commodity as the fifth most important export for Otay Mesa and the tenth for Tecate.
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An Evaluation of Arizona's Competitiveness
Skilled Human Resources and Labor Pool Development
T
City
he availability of skilled human resources was identified in the 1999 Evaluation of Arizona Competi tiveness as an important factor contributing to a region's ability to compete economically. For the plastics industry in particular, it was found that advantageous incentive packages in many cases were not enough to lure companies away from qualified workers. A community's workforce must be able to produce valuable products and services, in order to attract and retain employers as well as increase wages.1 A higher skill base demands higher wages because companies require "intelligence capital" to succeed in the current technology-driven economy. The presence of skilled labor is an investment incentive because these talented employees allow firms to be innovative and identify processes for expediting the movement of goods and services.2 In the Yuma region, for instance, the Proving Ground cites a high-quality workforce and favorable climate as critical components in their competitive advantage strategy. At the facility, employees skilled in the utilization of sophisticated technology are conducting an average of 100 tests at any one time.3
Labor Force and Industry Employment
Table 5.1 and Figures 5.1 and 5.2 provide information on the general characteristics of each community's labor force. The data measure civilian labor employment and unemployment rates for the cities and counties in the study area. TABLE 5.1: CITY AND COUNTY CIVILIAN LABOR FORCE ESTIMATES, 1999; Civilian Labor Force 726,609 622,790 526,726 258,293 239,084 68,006 34,686 8,815 6,230 4,601 County Maricopa San Diego Bexar El Paso Pima Webb Yuma Santa Cruz Imperial Cochise Civilian Labor Force 1,514,859 1,358,200 669,947 287,600 384,579 72,729 66,773 13,396 42,800 39,994
Phoenix, Arizona San Diego, California San Antonio, Texas El Paso, Texas Tucson, Arizona Laredo, Texas Yuma, Arizona Nogales, Arizona Calexico, California Douglas, Arizona
Sources: Arizona Department of Economic Security, Special Unemployment Report for January through December 1999, Revised March 2, 2000, Research Administration Benchmark 1999; California Employment Development Department, Labor Market Information Division, Labor Force Data for Sub-County Areas, Not Seasonally Adjusted 1999 Benchmark--March 28, 2000, available from Internet: www.calmis.ca.gov/file/lfhist/99aasub.txt; Texas Workforce Commission, City and County Civilian Labor Force Estimates Actual Series, 1990-Current Modified April 20, 2000; available from Internet: www.twc.state.tx.us/lmi/lfs/type/unemploymentcityb260.htm.
An Evaluation of Arizona's Competitiveness
27
FIGURE 5.1: CITY UNEMPLOYMENT RATE ESTIMATES
35
31
30 25
21 22
20 15
11
10 5 0
3 3 3 3
8
9
San Tucson Phoenix San Laredo El Paso Douglas Yuma Nogales Calexico Diego Antonio
FIGURE 5.2: COUNTY UNEMPLOYMENT RATE ESTIMATES
30
30 25 20
17
23
15 10
6 8 9
5 0
3
3
3
3
Maricopa Pima
San Diego
Bexar Cochise Webb
El Paso Santa Imperial Yuma Cruz
Sources: Arizona Department of Economic Security, Special Unemployment Report for January through December 1999, Revised March 2, 2000, Research Administration Benchmark 1999; California Employment Development Department, Labor Market Information Division, Labor Force Data for Sub-County Areas, Not Seasonally Adjusted 1999 Benchmark--March 28, 2000, available from Internet: www.calmis.ca.gov/file/lfhist/99aasub.txt; Texas Workforce Commission, City and County Civilian Labor Force Estimates Actual Series, 1990-Current Modified April 20, 2000; available from Internet: www.twc.state.tx.us/lmi/lfs/type/unemploymentcityb260.htm.
28
An Evaluation of Arizona's Competitiveness
Skilled Labor Employment
Data from the Bureau of Labor Statistics allows comparison of occupational employment strengths and weaknesses among the various communities. The 1998 data, summarized in table 5.2, indicate the following notable differences:
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Phoenix, with the largest employment total, stands out from its closest competitor, San Diego, in many of the occupational classifications. San Diego is distinguished by larger numbers of computer engineers, machinists, and both electronic assemblers and electronic precision assemblers. Despite having less than half the occupational base of San Antonio, Tucson employs larger numbers of chemical engineers and materials engineers. Yuma exceeds both Laredo and Douglas in the number of production/operations first line supervisors. Douglas is distinguished for having twice as many engineering, mathematical, and natural sciences managers as either Laredo or Yuma, because of the proximity of Fort Huachuca Army Base. The county has more than twice as many electrical/electronic technicians and computer support specialists, and eight times as many systems analysts as Laredo. Finally, it exceeds both Laredo and Yuma in the number of computer programmers; in fact, Douglas has nine times the number of computer programmers as are in Yuma. San Antonio exceeds both Tucson and Phoenix in the number of aircraft mechanics. El Paso and San Antonio exceed Tucson in the number of tool/die makers. Relative to Tucson and San Antonio, El Paso is distinguished for its workforce of plastic molding operators, quite possibly a reflection of the city's aggressive strategy over the past few years of focusing on the development and recruitment of plastics and injection molding operations. El Paso also has more than three times the number of electronic precision assemblers as San Antonio does.
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TABLE 5.2: ESTIMATED SKILLED HUMAN RESOURCES BY REGION, 1998
Occupation Phoenix, Tucson, Yuma, Douglas, San San El Paso, Laredo, Arizona Arizona Arizona Arizona Diego, Antonio, Texas Texas California Texas
Accountants/auditors
11,290
1,640
140
80
7,930
4,550
990
310
Aircraft mechanics
1,430
930
n/a
n/a
n/a
2,170
n/a
n/a
Chemical engineers
300
80
n/a
n/a
180
50
n/a
n/a
Computer engineers
3,620
790
n/a
340
4,030
2,230
50
n/a
Computer programmers
8,580
1,310
20a
180
5,890
1,840
320
120
Computer programmer aides
1,820
270
n/a
n/a
810
310
30
n/a
Computer support specialists
6,450
1,300
30
60
5,070
1,330
310
100
Database administrators
1,360
220
n/a
n/a
980
390
160
n/a
Continue Table 5:2 on page 30
An Evaluation of Arizona's Competitiveness
29
Occupation
Phoenix, Tucson, Yuma, Douglas, San San El Paso, Laredo, Arizona Arizona Arizona Arizona Diego, Antonio, Texas Texas California Texas
Electrical/electronic assemblers
2,210
360
n/a
n/a
3,620
790
560
n/a
Electrical/electronic engineers 6,870
730
n/a
n/a
5,400
1,030
390
n/a
Electrical/electronic precision 1,940 assemblers Electrical/electronic technicians 7,790
n/a
n/a
n/a
3,270
100
320
n/a
820
n/a
130
6,590
1,120
480
60
Engineering, mathematical, 6,000 and natural sciences managers General managers/top executives Industrial machinery mechanics Machinists 30,210
880
40
80
4,100
1,690
350
40
6,120
680
570
28,350
18,960
6,330
2,200
2,070
240
30
20
1,370
890
580
80
3,700
920
n/a
n/a
4,440
940
590
n/a
Marketing/sales supervisors
20,910
4,140
500
410
14,950
8,680
2,780
810
Materials engineers
280
70
n/a
n/a
180
60b
n/a
n/a
Mechanical engineers
3,660
290
n/a
30
2,570
780
200
n/a
Plastic mold/casting machine operators/technicians Production/operations first line supervisors Systems analysts
920
200
n/a
n/a
530
310
340
n/a
5,620
750
70
60
3,770
1,800
1,800
60
6,350
1,400
n/a
320
4,710
3,110
520
40
Tool/die makers Total, all occupationsc
830 1,421,350
120 277,880
n/a 35,350
n/a
750
220
190
n/a 46,550
32,420 1,078,180
627,850 219,380
a.Figure obtained from Arizona Department of Economic Security, Research Administration (February 2000), available from www.de.state.az.us/link/economic/webpage/page6.html. b.Figure provided by Jim Van Geffen, Texas Workforce Commission, May 9, 2000. c.These totals include additional occupations not listed in this table.
Source: U.S. Department of Labor, Bureau of Labor Statistics, "1998 Metropolitan Area Occupational Employment and Wage Estimates, Occupational Employment Statistics, Bureau of Labor Statistics" (February 4, 2000), available from http://stats.bls.gov/oes/state/. 30
An Evaluation of Arizona's Competitiveness
Grupo Mexico has been actively exploring the establishment of its corporate headquarters in Tucson. Development officials are hopeful that a move by Grupo Mexico coupled with the consolidation of Phelps Dodge's corporate headquarters in Phoenix will provide Arizona with one of the highest concentrations of copper mining executives in the world.4
Maquiladora Employment
Information on the total distribution of employment by occupational classifications for specific maquiladora plants in San Luis R�o Colorado, Sonora, south of Yuma, is provided in table 5.3. Daewoo Electronics de Mexico is the largest employer with 2,300 workers, followed by BOSE (1,200), Exportex-Secci�n Lavander (1,100), and Exportex de Mexico (1,050; if the two Exportex divisions are combined, Exportex ranks second). As is true in the maquiladora industry in general, the workforce is concentrated in production. TSE is unique in that, with only 320 employees, it has the second highest number of workers employed as technicians (102).5 Figure 5.3 indicates that the distribution of employment in Tijuana maquiladoras is similar to that of San Luis R�o Colorado. TABLE 5.3: MAQUILADORA EMPLOYMENT IN SAN LUIS R�O COLORADO, SONORA Company Name AM-MEX Brake BOSE C�a de Juguetes Mexicanos Daewoo Electronics de M�xico Daewoo Electro Components M�xico Devanish de M�xico Exportex de M�xico Exportex de M�xico (Secci�n Lavander) Fashion Fabrics Hyo Seung de M�xico Industrias Frenco J. Marcel de M�xico Lonta de M�xico Manufactura y Rep. BCJ Mecox Resources Moreno Manufacturas Olguita de M�xico Paul-Son Mexcana Continue Table 5.3 on page 32 Administrators 4 250 78 300 37 7 80 55 10 6 7 7 10 3 18 4 9 21 Technicians 1 60 22 300 28 7 50 40 8 3 2 4 1 0 77 2 7 40 Laborers 43 890 385 1,700 315 231 920 1,005 69 132 18 289 72 14 52 34 759 439 Total Employees 48 1,200 485 2,300 380 245 1,050 1,100 87 141 27 300 83 17 147 40 775 500
An Evaluation of Arizona's Competitiveness
31
Company Name Poder Uno de M�xico Prestig�o de M�xico R�o Colorado Textil SANA International San Luis Textil Contractors SEHIWA Sirenamex Sportif de M�xico TSE de M�xico Total
Administrators 35 21 2 40 1 5 8 6 30 1,089 (9.4%)
Technicians 35 17 0 10 2 4 38 54 102 963 (8.3%)
Laborers 730 162 9 220 37 41 227 169 188 9,446 (82.2%)
Total Employees 800 200 11 270 40 50 273 229 320 11,498
Source: San Luis R�o Colorado Direcci�n de Desarrollo Econ�mico y Turismos, San Luis R�o Colorado, Sonora: Strategic Convergence Location/Punto de convergencia estrat�gica, (n.d.), p. 25. FIGURE 5.3: TIJUANA MAQUILADORA EMPLOYMENT
Administrative
Technical
Line Operators
Source: San Diego State University Institute for Regional Studies of the Californias, "Tijuana, Basic Information," p. 5; www.rohan.sdsu.edu/~irsc/tjreport/tj5.html.
Educational Attainment
According to a 1999 report by the Milken Institute, leading locational factors for high-technology operations were the presence of a trained and educated workforce, proximity to superior educational institutions, an existing supplier base, and amenities associated with a high quality of life. The study's authors emphasized that state and local government investments in workforce development not only assist the companies currently in the region, but can serve as an impetus for new economic development. Based on their findings, the most significant and common characteristic of successful areas was a high percentage of college graduates in the population.6 32
An Evaluation of Arizona's Competitiveness
Exemplifying these findings is the role of the University of Arizona's Optical Science Center. Founded in 1964, the center leads other U.S. institutions in the number of optical science graduates. Tucson--with more than 120 optics firms, many of which were founded on technology generated from the center--boasts one of the highest concentrations of optical science talent nationwide.7 Based on census data on college educational attainment, figure 5.4 indicates that San Diego, Tucson, and Phoenix stand out relative to the other communities. Among the smaller communities, Douglas shows high attainment levels in this category, again probably due to the proximity of Fort Huachuca (see table 5.4) . FIGURE 5.4: COLLEGE EDUCATIONAL ATTAINMENT PERCENTAGES BY REGION
30
25
25 20 15 10 5 0
23 22 19 16 15 13 11 10 9
San Tucson Phoenix San Douglas El Paso Yuma Diego Antonio
Laredo Nogales Calexico
Source: U.S. Census Bureau, 1994
TABLE 5.4: ESTIMATED ENROLLMENT IN INSTITUTIONS OF HIGHER LEARNING Community San Diego Phoenix San Antonio Tucson Laredo El Paso Calexico Yuma Douglas Nogales Enrollment 284,082 207,462 72,267 70,314 50,430 33,527 7,789 6,489 4,394 80
Sources: For Phoenix: City of Phoenix, Community and Economic Development Department, "Phoenix: Marketplace Facts and Figures." Greater Phoenix Economic Council, "GPEC Fact Book" www.gpec.org. For Tucson: Records Office, Tucson University; Academic Center, Chapman University; Administration, Phoenix University; DavisAn Evaluation of Arizona's Competitiveness
33
Monthan site, Park College; IPEDS Opening Fall Enrollments, The University of Arizona; Institutional Research, Pima College. For Yuma: Statewide Academic Programs, Northern Arizona University; Off-Campus Academic Programs, Southern Illinois University; Registrar's Office, Arizona Western College; Registrar's Office, Webster University. For Nogales: Statewide Academic Programs, Northern Arizona University; Institutional Research, Pima Community College. For Douglas: Admissions Office, Cochise College; Student Services, Western International University; Statewide Programs, Northern Arizona University; The University of Arizona�Douglas Campus coordinator; Institutional Research, Pima College. For San Diego: San Diego Regional Economic Development Corporation. For Calexico: Admissions Office, Imperial Valley College; Registrar's Office, San Diego State University�Calexico; National University, Marketing and Student Services Office. For San Antonio: San Antonio Economic Development Foundation. For El Paso: Greater El Paso Chamber of Commerce. For Laredo: Laredo Development Foundation. Available enrollment data for the Mexicali region indicate that approximately 25,000 individuals were enrolled in an institution of higher learning in 1999 (Table 5.5). TABLE 5.5: ESTIMATED ENROLLMENT IN INSTITUTIONS OF HIGHER LEARNING IN THE MEXICALI, BAJA CALIFORNIA REGION, 1999 Institution Universidad de Baja California Instituto Technol�gico de Mexicali CE California TI CETYS University CONALEP II CONALEP/Ejido Pueblo Estimated Enrollment 15,000 5,000 3,000 1,500 450 120
Source: "Background Info: About Mexicali," Twin Plant News 14, no. 12 (July 1999), 53.
Educational Activities and Initiatives
The state of Arizona has undertaken initiatives to increase local educational opportunities and improve the skill level of the workforce. During 1999 Governor Jane Dee Hull and university leaders from around the state of Arizona met with Mexico's education secretary to discuss further collaboration in the areas of academic credit transfers, faculty and student exchanges, and joint research in business, trade, science, and engineering.8 Given significant labor shortages in the agricultural, tourism, and service industries as well as the rise in illegal immigration, the governor of Arizona is proposing a short-term revival of the guest worker program. The program would allow non-immigrant guest laborers to apply for foreign labor assistance through the existing H-2 visa programs. The cumbersome administrative requirements for these programs would be expedited by an efficient system based on a universal biometric work authorization card to provide proper documentation for immigrant workers. In addition, the proposal calls for using labor shortages as a criterion for certifying workers, making visas extendable, and adopting a fast-track employer certification process.9
Phoenix Area
For the fifth consecutive year, the American Graduate School of International Management (Thunderbird) was rated the top school in the nation for international business according to the April 2000 U.S. News & World Report rankings of the best graduate schools. Among schools of business, irrespective of specialization, Thunderbird was rated 34th overall, behind the University of Arizona (31st) and Arizona State University--Main Campus (32nd).10 Thunderbird is one of twenty-six schools in the nation to be designated a Center for International Business Education and Research 34
An Evaluation of Arizona's Competitiveness
(CIBER). The curriculum for the master's program in international management is being revised for the 2000-2001 academic year. While retaining the traditional scope of international studies, modern languages, and world business requirements, students are now required to choose a regional focus, specialize in a course of study, and complete a "capstone," or applied coursework in the chosen specialization.11 Thunderbird offers a number of executive education programs targeting industry leaders, which include:
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Global management executive education programs Executive education partnerships Custom-designed programs Language and culture training Executive master's degree program12
Arizona State University's Bank One Economic Outlook Center provides sophisticated statistical modeling and computer-based planning as a public service. Established in 1985 and named for Bank One in 1997, the center publishes the Consenso de Pron�sticos Econ�micos (Mexico Consensus Economic Forecast) on a quarterly basis. Leading Mexican experts provide an analysis and forecasts on the economy of Mexico.13 Arizona State University directed a collaborative effort with the University of Arizona to survey maquiladoras along the Arizona-Sonora border. The study findings suggested that the plants were utilizing lean manufacturing techniques to compete on price, quality, and delivery issues. Another key finding was that firm executives anticipated moving toward greater sourcing of supplies and components from the local markets.
Tucson Region
The University of Arizona is engaged in a host of activities to enhance regional linkages with the states of Sonora and Sinaloa as well as to provide instruction that prepares students for an increasingly globalized trade environment. Notable activities include the following:
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On October 7-8, 1999, the University of Arizona's new president led a delegation of department heads, faculty members, and administrative officials to meet with the rector of the University of Sonora. The visit to Hermosillo yielded information on Mexico's higher education system, meetings between faculty members to discuss collaborative research, and a formal signing of a convenio (agreement) between the two institutions. The convenio builds on efforts by previous presidents to formalize relationships between the two universities. The disciplines targeted for cooperation were water research, environmental studies, economic development, agriculture and food production,and engineering. Faculty members from the University of Arizona expressed an interest in reciprocal adjunct faculty opportunities, a brochure to stimulate transboundary study programs between student populations, and agreements regarding access to archaeological sites in Sonora.14 In the past, the University of Arizona Agricultural Extension staff have worked with Sonoran colleagues on agricultural producer outreach and training programs. As part of the university-coordinated Arizona-Sonora Project, which promotes binational planning, researchers from Arizona and Sonora completed a comprehensive study of the agricultural industries in each state, which included the identification of the economic complementarities that would facilitate transboundary integration in this sector. Arizona-Sonora Agribusiness Cluster: Analysis and Recommendations for Development served as the blueprint for the creation of a binational industry cluster organization that seeks to enhance the competitive position of the two states. 15 The Southwest Border Technology Project (SWBTP) is a partnership between the University of Arizona and the National Institute of Justice Office of Science and Technology. Utilizing resources at the University of Arizona Science and Technology Park, this new initiative aims to establish a platform for the identification and implementation of technologies to expedite cross-border commercial transactions and support the interception of illegal conveyances. In addition to operating several test beds to determine the feasibility of specific technologies,
An Evaluation of Arizona's Competitiveness
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the project will act as a clearinghouse for inspection and detection technologies and maintain a comprehensive technology database.
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BorderPACT is a network to foster change and collaboration among border institutions of higher education in the U.S.-Mexico borderlands.16 In 1999, with sponsorship from the Ford Foundation, BorderPACT awarded $60,000 in grants to recipients along the U.S.-Mexico border. Funded projects included construction of a satellite medical clinic, community outreach to educate immigrants on their legal rights and responsibilities, identification of culturally appropriate speech and language treatment techniques for Mexican children, and translation of an environmental curriculum into Spanish for sixth-, seventh-, and eighth-grade students. 17 Working in tandem with this network is the Consortium for North American Higher Education Collaboration (CONAHEC), whose executive director is based at the University of Arizona. CONAHEC serves as the lead agency in the administration of the trinational system fostering improved academic cooperation in North America. 18 The second annual Border Academy, hosted by the Mexican American Studies and Research Center at the University of Arizona was held over two weekends in July 1999. The academy focused on border health issues during the first weekend session and concluded the following weekend with a session on economic development issues. The health session focused on health status, health systems, and community-based health projects along the border. In the discussions on economic development, participants explored issues concerning NAFTA's impact on Canada, importation and exportation of winter produce, transportation, immigration and the maquiladora industry. Presenters from Germany and Poland highlighted a global perspective to borderland development issues.19 Undergraduates in the University of Arizona College of Business and Public Administration are offered a supplementary program to enhance their understanding of international business transactions. The International Business Certificate Program (IBCP) consists of foreign language instruction and coursework in international business subjects, such as accounting, trade theory, finance, management, information technology, and political risk and intelligence analysis. Another component of the program is an academic year internship with an internationally active business in Tucson.20 The University of Arizona recently was one of four schools receiving a $400,000 grant from the Alfred P. Sloan Foundation to prepare students for private-sector employment. The grant provides seed money to schools that are attempting to create a link between educational instruction and industry. Starting in the fall of 2000, faculty from the College of Science and the College of Business and Public Administration will offer a professional master's degree in applied bioscience, mathematical science, and applied and industrial physics. An industry advisory board that included representatives of Raytheon and Motorola guided curriculum development.21 The National Law Center for Inter-American Free Trade, located in the University of Arizona College of Law, is leading an effort to establish legal principles for conducting e-commerce across international boundaries. In September 1999, the center hosted a meeting of representatives from Canada, the United States, and Latin America to identify key obstacles to e-commerce trade with specific attention to Latin America.22
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Like the University of Arizona, Pima Community College is initiating strategies to address opportunities and challenges for international commerce and high-tech development.
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The International Business Studies Advisory Committee at Pima Community College is developing a Center for International Studies to be located at the West Campus. In conjunction with the Technological Institute of Sonora (ITSON), the international business faculty will have 20 ITSON students take courses at the college during the summer of 2000. In addition to establishing a course on e-commerce, the International Business Studies program will be offering expanded instruction on cultural differences management, international economics, and globalization. The college, which currently offers an associate degree in international business, is developing an international business certificate program.23 A new program at the Pima College West Campus is preparing minimum-wage workers to be electronics technicians. In addition, the Downtown Campus provides instruction in machine tool technology through a partnership with the National Tooling and Machining Association apprenticeship program. 24 A significant chal lenge for the college has been retaining the 150 to 230 students who enroll each semester for the machine tool
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An Evaluation of Arizona's Competitiveness
technology degree program. A lead instructor for the program indicates that, with a shortage of skilled machinists in the region, industrial demand is prompting students to begin working prior to completing their degree.25
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Recently the college signed a 30-year lease with the Tucson Airport Authority (TAA) to build a 40,000-squarefoot hangar for its aviation program.26 The agreement underscores airport officials' concerns that the most serious challenge before Tucson is providing trained people to fill new jobs. TAA representatives indicate that the potential exists for significant employment increases in the local aerospace industry.27 A sizeable challenge to training efforts in Tucson and other communities in the state is that Arizona allocates significantly less money for customized training programs than do California and Texas. In 1999, Arizona funding totaled $5 million, in comparison to $117.2 million in California and $66.5 million in Texas. Arizona legislative appropriations for 2000 and 2001 reflect incremental increases to $6 million and $7 million over the two years. 28 The Department of Labor awarded Pima County Community Services a $788,000 federal grant to assist nonEnglish-speaking job seekers in obtaining marketable skills and to increase the pool of qualified workers. The grant--a collaborative effort by Pima County, the city of Tucson, the University of Arizona, and Pima Community College--will target Arizona participants, largely dislocated workers, for career-track health-care training and language proficiency instruction. This pilot project will run for two years.29 At the K-12 level, industry leaders advocated that the Tucson Unified School District choose as its new superintendent someone committed to public-private workforce development programs. Citing the need for students who can fill all employment levels in high-tech industries such as optics, information and computer technology, and aerospace, industry representatives stress that high-school graduates must acquire at least some technology skills. Every graduating student should have achieved computer literacy, proficiency with various computer programs, and the ability to access the Internet.30
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Yuma Region
The College of Business Administration at Northern Arizona University--Yuma Campus, is offering students internship opportunities with firms in Mexico to help them develop the critical insights and skills needed to perform effectively in a global environment. Following instruction in comparative business practices and intensive business Spanish, students spend an academic semester working in a maquiladora, a small business, or a nonprofit organization in San Luis R�o Colorado, Sonora. Several companies and organizations, including BOSE Corporation and Canacintra, have participated in the program. 31 Acknowledging the vital role that educational achievement plays in the economic success of their region, representatives of Northern Arizona University are initiating an analysis of the training requirements of the maquiladora sector in Sonora and of local manufacturing and distribution service companies. A public- and private-sector effort, the analysis could gauge industry support for training programs in the areas of customs clearing, freight forwarding, and supply chain management.32 Moreover, future training programs would seek to complement the training efforts already underway by Sonoran academic institutions and the maquiladoras themselves. The University of Phoenix recently opened an instructional site that provides business degree programs for working professionals in the Yuma region.
Nogales Region
A ballot initiative in the Nogales region sought voter approval for a provisional community college. The steering committee for this initiative is designing an educational program that would train the local workforce for high technology. Economic developers report that Nogales has an abundance of unskilled and semi-skilled labor. The college would provide an invaluable resource for community members who currently have to travel outside the region to obtain this level of instruction.33
An Evaluation of Arizona's Competitiveness
37
Douglas Region
Economic developers in Sierra Vista have partnered with Fort Huachuca to design a recruitment marketing program to attract skilled workers, such as engineers and technicians, from Tucson and other areas across the nation. This recruitment initiative is being funded through corporate sponsorship. In their recruitment efforts, city officials underscore the advanced technology developments at Fort Huachuca and locational advantages such a low crime and cost of living indices. 34
San Diego Region
Notable initiatives in the San Diego region are being undertaken by the University of California system, the California State University system local community colleges, the K-12 school system, and public-private partnerships. Many involve collaboration with similar institutions in Baja California. The University of California, San Diego established the Center for U.S-Mexican Studies in 1979 to support a broad range of research. Research priorities established for the year 2000-2001 are political transitions in Mexico, political and social consequences of Mexico's economic restructuring, Mexican environmental policy, the economic and political dimensions of North American integration, Mexican migration to the United States; and judicial reform, public security, and law enforcement in Mexico.35 The University of California, San Diego, School of Business Administration, in partnership with the Division of Continuing Education, offers a Certificate in International Business. Faculty members team with industry leaders and government officials to provide instruction in international finance, marketing, and business strategy. The program, which comprises seven 12-credit-hour classes, features information on negotiations, import and export strategies, legal issues, and a course on international e-commerce. 36 San Diego State University is one of 25 schools designated by the U.S. Department of Education as a federally supported national center of excellence in international business. CIBER, the Center for International Business Education and Research at that university, is the largest program of its kind in the United States. The MEXUS program, a component of the center, is marketed as "preparing for business without borders." In partnership with Southwestern College, Centro de Ense�anza T�cnica y Superior, and the Universidad Aut�noma de Baja California, MEXUS attempts to meet industry demands by internationalizing management education. The first binational undergraduate dual-degree program in the United States, the MEXUS Program features a semester-long or year long stay in Chile, Spain, Ecuador, or Mexico. A new partnership with the Instituto Technol�gico y de Estudios Superiores de Monterrey (ITESM), which has 26 campus in cities throughout Mexico, enables students to study in a wider array of places. MEXUS is developing dual-degree programs with six additional countries: Russia, China, Japan, Brazil, France, and Canada. A new trinational program sponsored by MEXUS, Project North America (PNA) is designed to increase mobility in North American higher education and enhance the human resource structure in the region. Student participants study in both Mexico and Canada. The "Progress Report to Implement a New Border Vision," which was presented at a meeting between the presidents of the United States and Mexico, recognized MEXUS along with 15 other programs as a binational model of educational cooperation and collaboration.37 The Institute for Regional Studies of the Californias (IRSC), established at San Diego State University in 1983, conducts extensive applied research on environmental, regional, and transborder planning issues. As part of its mission to serve as a forum for the discussion and dissemination of information on the border region of California and Baja California, IRSC publishes the Border Studies and Border Issues series and Mexico Policy News. Deficits in primary and secondary education are affecting not only the future workforce but the current workforce as well. Although a facility expansion by Applied MicroCircuits Corp, a leader in high bandwidth silicon for optical networks, underscores San Diego's ability to attract engineering expertise, a CEO roundtable in 1999 indicated that many engineers with families were choosing other locations because of a perception that San Diego has a poor K-12 system.39 In an effort to improve the skill level of high school graduates, the San Diego Unified School Board approved the "Blueprint for Student Success" in March 2000. Proponents describe the strategy as unique because it allows for extended learning in areas such as literacy and mathematics and requires students to undertake a demanding 38
An Evaluation of Arizona's Competitiveness
curriculum. They based this proposal on U.S. Department of Education findings that the most important predictor of whether a student graduates with a degree was not grades or test scores, but rather the level of difficulty of high school c l a s s e s .4 0
Calexico Region
A low level of training in Imperial County has traditionally required the importation of skilled workers.41 With a significant portion of its workforce ill-equipped for technological advancements, Imperial Valley College is designing a workforce-training program to address twenty-first century needs. Citing a booming maquiladora industry and regional business growth to support that sector, college administrators have partnered with the Small Manufacturers Institute to obtain grants for education in entry-level to advanced manufacturing disciplines.42 Consisting of the Small Manufacturers Association of California, the California State Universities Institutes, and the Sandia and Lawrence Livermore National Laboratories, the Small Manufacturers Institute was formed to promote manufacturing jobs as a critical component of economic growth. With continued growth projected, workers with valuable skills will be increasingly in demand.43 In 1998, with initial funding from a U.S. Department of Agriculture Rural Development Enterprise Grant, the California Center for Border and Regional Economic Studies (CCBRES) was established to serve as a resource for Imperial Valley and the larger California--Baja California region. Located at the San Diego State University--Imperial Valley Campus, the center compiles trade statistics and maintains an economic profile of the county. CCBRES has produced reports on unemployment, population estimates and projections, state and local foreign trade, and research methodologies for a study to assess worker availability in Mexicali.44
Mexicali Region
In 1998, the Centro de Ense�anza T�cnica y Superior Universidad (CETYS) conducted a four-part study to assess the availability of workers in Mexicali. Researchers utilized a variety of methodologies to assess the demand for labor by local industries, including consulting federal data sources and undertaking extensive interviews with plant managers, employees, and the general public. The findings indicate that Mexicali has a sizeable labor force pool; however, many of the unemployed were not working because they required flexible hours, child care, part-time employment, or were over 50.45 Seeking to make Mexicali a world-class industrial city, educators there have designed a linkage program to meet specific industry needs. This program includes a stated goal of creating a culture or attitude that generates professional and technical development in the areas of engineering, welding, metalwork, and plastic injection molding. To support this initiative, maquiladora managers are enlisted to provide instruction. Additional activities consist of custom technical training in specific applications and summer employment of instructors in maquiladoras so they can acquire information on current industry practices. 46 A regional committee of local schools is also implementing a pilot project to provide instruction on computer applications.47
San Antonio Region
As part of the "city-base" concept, Brooks Air Force Base signed a memorandum of understanding with Texas A&M University to create a center to study environmental challenges along the U.S.-Mexico border. The Frank M. Tejeda Center for Excellence in Environmental Operations is the result of an effort to stimulate greater research linkages among universities, industry, and the Air Force. Researchers will direct their attention to water and wastewater pollution prevention and provide outreach through education, training, and leadership development on border issues. City officials, noting that the base is an environmental research hub for the defense department, are optimistic that the partnership will generate new employment and wealth. 48 Northwest Vista College, a two-year institution, offers associate degrees in a variety of high-tech programs. The school graduated 14 students in 1999 with associate of applied science degrees in semiconductor manufacturing technology.49
An Evaluation of Arizona's Competitiveness
39
El Paso Region
El Paso city officials indicate that the most significant challenge facing their region is workforce development. Since the implementation of NAFTA, more than 50 major employers reportedly have either downsized or relocated from El Paso. Hispanic women over 30 who have less than a sixth grade education make up the majority of displaced workers in the region.50 With high levels of displaced workers who lack the necessary skills--such as English proficiency, a high-school diploma, and vocational training--to transfer into other occupational areas, particularly the growing teleservices field, the city hired consultants to prepare a strategic adjustment plan. Completed in December 1999, "A Vision for Tomorrow's El Paso: Economic Adjustment Strategic Plan" includes a workforce development recommendation to refocus programs toward an employer-driven approach with greater linkages to new and existing businesses. The consultants recommended that several steps be taken, including a review of current programs, a survey of the employment needs of El Paso businesses over the next year, and creation of a customer service training program at El Paso Community College.51 Several other workforce development programs are affiliated with the University of Texas at El Paso and El Paso Community College. The University of Texas at El Paso offers a bachelor of arts degree in business administration. Courses include international accounting, economics, and finance. In addition, students take classes on the economics of Latin America and Mexico, international management, and marketing. The Texas Manufacturing Assistance Center (TMAC), affiliated with the U.S. Department of Economic Development National Institute of Standards and Technology, is a one-stop shop for small to medium-sized manufacturers. In addition to fostering partnerships between manufacturers and the research community, the University of Texas at El Paso, TMAC provides opportunities for university students to obtain hands-on experience working for these local manufacturers.52 El Paso Community College, which is recognized for its workforce training efforts, offers a customs broker license preparation program. This program prepares students for careers in international trade through study of U.S. customs laws, importing and exporting, license preparation courses, global freight forwarding, and how to start a customs brokerage business.53
Laredo Region
Like many other communities along the U.S.-Mexico border, Laredo has a large number of unskilled workers. Economic developers emphasize that education must play a key role in creating a marketable labor force in Laredo. A trained workforce can not only attract industry but can raise the standard of living for the community.54 With only 47 percent of the student population graduating from high school and only 11 percent graduating from college, economic professionals are supporting career technology programs in the public schools.55 Playing a lead role in the effort to develop a skilled labor pool are the Texas A&M International University College of Business Administration and the Graduate School of International Trade (COBA/GSITBA). Graduate-level instruction is provided in business administration in the areas of international banking, international logistics, and information systems. A number of traditional business administration courses in finance and accounting are offered at the undergraduate level.56 Through a variety of programs, COBA also publishes monthly digests on border statistics (Border Business Indicators) and NAFTA-related issues (NAFTA Digest). In 1994, the university established the Border Trade Institute to collect U.S. customs import and export data at the five-digit SITC level for ports along the U.S.-Mexico border. The Office for the Study of U.S-Mexico Trade Relations (USMTR) maintains articles from a variety of press sources in an on-line searchable database. Since 1994, this institute has expanded to provide specialized information on agricultural issues through the Center for North American Studies in the U.S. Department of Agriculture. 57
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An Evaluation of Arizona's Competitiveness
Maquiladoras and Regional Supplier Development
Profile and Growth of Maquiladoras
During the last century the development of the maquiladora industry in Mexico ranks among the top outstanding economic events for the country. By the end of 2000, the industry expects to reach 3,700 plants and an employment level of 1,300,000 workers for an annual 8 percent growth rate. A recent survey by the Asociaci�n de Maquiladoras de Sonora (AMS) found that membership anticipated a 20 percent growth in direct labor by the end of 2000. Textiles, electrical and electronic materials, and other manufacturing sectors make up the bulk of the industrial activity for maquiladora plants in Mexico. Furniture and parts, automotive equipment, and chemical products are other important production efforts (Figure 6.1). FIGURE 6.1: PERCENTAGE OF MAQUILADORAS BY INDUSTRY ACTIVITY
Services Other Manufacturing Sectors Food Processing
Textiles
Toys & Sporting Goods
Electrical, Electronic Materials Electrical, Electronic Machinery Equipment and Tools Automotive Equipment Shoes & Leather Goods Furniture & Parts Chemical Products
Source: "Maquila Scoreboard," Twin Plant News, May 2000, p.71.
As indicated in figure 6.2 the largest concentration of maquiladora plants is in the state of Baja California, followed by Chihuahua and Tamaulipas. Although Sonoran maquiladoras make up only 9 percent of the industry in Mexico, compared to other Mexican states Sonora experienced one of the highest percentage increases in the number of maquiladora plants between 1998 and 1999. During this year, the number of plants in Guadalajara increased by 50 percent, followed by three communities in Sonora--Nogales (29.6 percent), Hermosillo (28.6 percent), and Guaymas (23.5 percent)--and Ensenada, Baja California (23.5 percent; Table 6.1). Between 1998 and 2000 Nogales, Sonora, experienced a considerable increase (48 percent) in the number of maquiladoras, from 81 to 120. Employment grew nearly 20 percent between 1998 and 2000, to an estimated workforce of 38,283 in June 2000. Double-digit growth occurred in Matamoros (19.1 percent), Ciudad J�arez (14.7 percent), and Tijuana (10.7 percent). Agua Prieta, at 6.5 percent, was among several communities (Monterrey, Mexicali, Ciudad Chihuahua, and Nuevo Laredo) that showed more modest increases. Over the longer term, however, Mexicali has experienced dramatic growth in maquiladora employment. Between 1995 and 1999, maquiladora employment increased 100.4 percent, even though Mexicali continues to have substantially fewer firms than Tijuana (184 to 737). Regional reports attribute this growth to the relocation of large firms into the area.1 San Luis R�o Colorado was noteworthy as the only community listed to experience a decrease (-3 percent).
An Evaluation of Arizona's Competitiveness
41
FIGURE 6.2: PERCENTAGE SHARE OF MAQUILADORA PLANTS IN SELECTED MEXICAN STATES, 2000
Baja California Other states
Tamaulipas
Sonora Chihuahua Nuevo Le�n Coahuila
Source: "Marquila Scoreboard," Twin Plant News, May 2000, p.70.
TABLE 6.1: PERCENTAGE CHANGE IN NUMBER OF MAQUILADORAS, 1998 TO 1999] Community Tijuana Ciudad Ju�rez Mexicali Matamoros Monterrey area Reynosa Nogales Ciudad Chihuahua Ensenada Ciudad Acu�a Nuevo Laredo Piedras Negras Hermosillo San Luis R�o Colorado Agua Prieta Guadalajara Guaymas Maquiladoras 1998 666 252 172 115 120 99 81 76 68 54 53 44 42 33 31 22 17 Maquiladoras 1999 737 289 184 137 130 111 105 81 84 57 54 44 54 32 33 33 21 Pct. Change 19981999 10.7% 14.7 7.0 19.1 8.3 12.1 29.6 6.6 23.5 5.6 1.9 0.0 28.6 -3.0 6.5 50.0 23.5
Sources: "Maquila Scoreboard," Twin Plant News, November 1998, p. 63; "Maquila Scoreboard," Twin Plant News, November 1999, p. 71.
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An Evaluation of Arizona's Competitiveness
Regional Activities and Initiatives
Efforts to increase the number of regional producers and suppliers, and the linkages between them, are underway in every community explored in this report. An increasingly popular strategy is trade shows, which feature the products and services of regional suppliers and the sourcing needs of maquiladoras and other industries in the area. Ninetyseven expositions were tentatively scheduled during the calendar year 2000 in Monterrey, Nuevo Le�n.2 Table 6.2 highlights some of the most popular trade shows occurring in the U.S border region and Mexico. TABLE 6.2: TRADE SHOWS AND EXPOS IN THE U.S.-MEXICO REGION ENVIROMATCH MEXPORT 2000 ANIPRON Trade Show Borderland Tradeshow Expo Industrial 2000 Vision 2000 Nogales Expo ADOC International Trade Seminar NAFTASHO 2000 EXPO Obreg�n 2000 Southern AZ/Sonora International Business Expo Plasti Imagen Show Match Mex 2000 Guadalajara, Mexico Otay Mesa, California Mexico City El Paso, Texas Hermosillo, Sonora Laredo, Texas Nogales, Sonora Tucson, Arizona Calexico, California Ciudad Obreg�n, Sonora Tucson, Arizona Mexico City Mexico City November 1999 February 2000 February 2000 March 2000 March 2000 March 2000 April 2000 April 2000 April 2000 May 2000 July 2000 September 2000 September 2000
Sources: 2000 trade show calendars from Office of International Business, CINTERMEX, SECOFI, Arizona Department of Commerce, and states of Coahuila, Tamaulipas, New Mexico, California, and Baja California Norte.
Survey of Sonoran Maquiladoras
Recognizing the potential impact of maquiladoras on a region, a team of researchers from Arizona State University and The University of Arizona surveyed production-sharing plants in Sonora, Mexico. The study indicated that these world-class manufacturers are competing on price, quality, and on-time delivery. Many are full-service production facilities and many are implementing lean manufacturing techniques, such as ISO 9000. Of particular interest, maquiladora managers reported that although they are becoming more independent in their decision-making structures, purchasing is still controlled in large part by the parent companies. The respondents noted that the existence of suppliers was not a critical factor in their company's decision to locate in Sonora, although most respondents did anticipate an increase in local purchases from both Arizona and Sonora suppliers. The study concluded with the following recommendations:
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Establish a cross-border maquiladora industry cluster organization to provide linkages between suppliers and maquiladoras. This group would address workforce, transportation, and policy issues Design a marketing plan that includes visits with parent companies outside of Arizona to encourage increased use of local suppliers and further maquiladora development
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An Evaluation of Arizona's Competitiveness
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Assist regional suppliers in developing competitive strategies for just-in-time production, in improving performance with information technologies, and in obtaining quality certifications such as ISO 9000. Enhance infrastructure and efficiency of border crossing through common priorities and lobbying efforts between regional economic developers and maquiladora parent companies in Arizona. Integrate workforce development needs of maquiladoras into the economic development plans for the region.3
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Initiatives in the Tucson Region
The Tucson-Mexico Project of the city of Tucson continues to implement its Maquiladora Supplier Program, which focuses on increasing Tucson-area purchases by the Mexican maquiladora industry. In its first year the program exceeded expectations: Eight contracts were awarded to Tucson companies with an estimated value of $618,000. In total, Tucson manufacturing supplier companies submitted to maquiladora plants 22 bids worth more than $3 million. In an effort to increase supplier linkages, program staff has been attending trade shows and have been working with the Greater Tucson Economic Council to attract companies to Tucson to supply the maquiladora industry. Targeted suppliers include zinc die casting, industrial plating, and high-volume thermoset plastics companies. 4 In November 1999, the Tucson-Mexico Project collaborated with the Agua Prieta Chamber of Commerce to bring 40 private-sector representatives from Tucson to Agua Prieta to explore complementarities between the maquiladora industry and the supplier base in Tucson.5 In March 2000, the Tucson-Mexico Project hosted the Expo Industrial 2000 in Hermosillo, Sonora. This international trade show featured nearly 100 businesses and reportedly drew approximately 4,300 visitors from around the world. Representatives of seven Tucson companies traveled with project representatives to participate in matchmaking opportunities between suppliers and maquiladoras. The organizers envision a more cost-effective and timely maquiladora supply delivery system as a result of the exposition. An estimated 96 percent of the supplies sourced by maquiladora plants in Mexico are purchased from outside the local region. These purchasing patterns lead to costly freight charges and delays.6 The Tucson-Mexico Project is a critical resource for Tucson-based companies seeking a relationship with clients in Mexico. A box company headquartered in Tucson entered the maquiladora supplier market by opening a new plant in Nogales, Sonora. By manufacturing corrugated cartons in Mexico, the company claims to have attracted nearly a dozen new clients, provided jobs for more than 30 workers, and established an advantage over competitors, namely their ability to serve the Mexican counterparts of their clients--Xerox, General Instruments, BOSE, ACCO, and Master Lock--more efficiently. The firm's Tucson operation performs warehousing, distribution, and design functions, while the plant in Sonora provides the vast majority of handwork and assembly functions.
Initiatives in the Yuma Region
The Yuma Proving Ground (YPG), described as one of the largest military installations in the world, is attempting to develop supplier and development relationships with regional industries and academic institutions. The Desert Testing and Training Facilities, a critical component of the installation, conducts an average of 100 tests at any given time on helicopter armament, long-range artillery, and main battle tanks. Each year more than 50 units from around the nation come to the Proving Ground to train at the Military Freefall School, part of the John F. Kennedy Special Warfare Center, which specializes in freefall parachuting techniques. Because the military installation requires a wide spectrum of supplies and services to maintain its sophisticated array of technology-based equipment, local economic developers in partnership with the YPG are seeking ways to enhance regional sourcing expertise.7 Development officials in San Luis R�o Colorado, Sonora, approximately 20 miles south of Yuma, have developed a sophisticated bilingual marketing brochure in order to attract U.S. investment. The brochure emphasizes the community's strategic location, its efforts to modernize, and the existence of a qualified labor force. Noting that national and foreign investors have found their community a fertile ground for establishing manufacturing operations, the document highlights additional factors such as plenty of level terrain, electricity, and water.8
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An Evaluation of Arizona's Competitiveness
The featured speaker for the session on small business opportunities in Mexico at the fourth annual Desert Pacific Regional International Trade Show and Conference was a businessman who had established a NAPA Auto Parts operation in San Luis R�o Colorado. He outlined the procedures for opening a retail business in Mexico. They include:
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Engage a Mexican attorney who is also a notary public and a Mexican accountant. Ensure that both are familiar with the procedure for setting up alien businesses. Acquire a U.S. passport, a process which may require two to four weeks. Acquire a Mexican visa at the Immigration Office for approximately $125 U.S. dollars. By actually traveling to the border office, he received his documents in less than a week. Obtain for your business the Articles of Incorporation, known in Mexico as Anonymous Society. This process can be complex and time consuming, in some cases taking as long as a year if there are inaccuracies on the form. By obtaining a copy of the Articles of Incorporation of a similar business, and using them as a model, this individual was able to complete the task in one day. After obtaining Articles of Incorporation and a legal identity, obtain a Federal Tax ID number, a process estimated to take two weeks. New businesses are encouraged to join SECOFI, the federal chamber of commerce in Mexico, in order to access useful networking opportunities. Apply for a Social Security Tax ID number, which in this case was completed by the company's accountant in about one week. After securing a lease, obtain an Occupant's License, the equivalent of a business license, permitting one to conduct business.
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The handouts provided with this presentation indicated that the entire process took nearly six weeks to complete, since the speaker personally handled all the details. He estimated his out-of-pocket expenses at approximately 2000 U.S. dollars.
Initiatives in the San Diego Region
On June 15, 2000, the Otay Mesa Chamber of Commerce and the San Diego Regional Economic Development Corporation hosted the MEXPORT